Gold Standard

QUESTION: If money was gold we would not have inflation. Why do you disagree with that? Do you like inflation?

ANSWER: Sorry. Even when gold was money in coin form there was inflation. The economy rises and falls. That is the Business Cycle. Those who advocate the Gold Standard have never invested what they claim. We were on a gold standard between 1945 and 1971 and it did not prevent inflation nor did it last.

You must investigate the past with an open mind. Let what happened unfold without trying to support a redetermined assumption. Westerners favored the new Bank of the United States before the Panic of 1819, which created open opposition to the institution. The Second Bank of the United States stopped allowing payment of debts in paper and instead demanded payment in specie—metallic gold and silver coins—which were in short supply after the War of 1812 due to a large trade deficit with Britain. The hardest hit sector was Western farmers who could not pay their loans to the Bank because they could not obtain the specie that was demanded. The Second Bank of the United States then forced western branches to foreclose on farms with outstanding loans. Westerners began to call for reform and the end of the Bank of the United States.

Can you imagine you have a 30 year mortgage bought with paper dollars, and then we adopt a gold standard. You do not have enough gold to repay the loan so they come take everything you have. Think twice before buying into that story. There is no way to make such a transition.