23 March 2009

Defend the Gold Standard

Nice reply to Michael Sesi's Bloomberg piece "Gold Standard Fans Yearn for Great Depression" by Robert P. Murphy of the Mises Institute:

But that is clearly not what Sesit is arguing in his Bloomberg piece. No, he is arguing that the gold standard is a bad idea because it keeps the central bankers from using all the latest, cutting-edge macro models to fine-tune the economy.

Rather than his proposal, I would far prefer the classical gold standard. It's true that the government can always renege on its pledge to maintain a fixed peg to gold, but at least everybody would know exactly when the government cheated. You would at least avoid absurdities such as the present crisis, in which people are actually praising the Fed for pumping in unprecedented amounts of new money in order to "help."

And while we are on the topic of the Gold Standard, this is a handy link list The History of the Gold Standard: 25 Great Web Sites to Research Its Rise and Fall, although some of the links are pretty simplistic.

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