The debate surrounding the gold standard both dates back to the earliest days of capitalism and remains a divisive issue even today. A gold standard-based economic system refers to one in which a national currency corresponds to a physical quantity of gold stored in a Federal bank. Under a gold standard, we could expect government to either sell or buy gold at according to that established value.
Those who support the gold standard see it as an important measure in order to prevent politicians from destroying the value of currency. Economists refer to this position as “Keynesian”. Keynesians tend to blame a great deal of the world’s recent economic difficult on our failure to pay more strict attention to gold prices.
Those who oppose the gold standard do not see anything special about gold, or its value. Economists refer to those who oppose such a standard as “monetarist.” Monetarists conceive of gold as just one commodity among many, suggesting that we should look to the study of economics when devising economic policies. The monetarist opposition sees the gold standard as arbitrary and dogmatic. Quoted in the New York Times, University of Chicago academic economist Richard Thaler asked why gold as opposed to “1982 Bordeaux?”
In 1980, Ronald Reagan made a platform promise to undo former president Nixon’s legislation that lead to the abolishment of the gold standard. As Reagan’s presidency progressed, he failed to keep this promise. While he did appoint a commission to re-establish the gold standard, the commission itself contained a sizable number of individuals that took a firm stance against the re-establishment of the gold standard.
New York Times columnist Floyd Norris calls attention to the parallel between the promises made by Reagan and a few recent campaign trail comments made by Newt Gingrich. Forbes Magazine calls Gingrich’s comments on the gold standard the “biggest under-reported story of the South Carolina primary.”
Gingrich calls for a “return to hard money” and often accompanying the suggestion with images of strict discipline. Ron Paul, himself a gold coin collector and aficionado, supports the idea of the gold standard even more vocally than Gingrich.
Like Reagan, Gingrich promises to “appoint a commission,” but as we now know from experience, creating a commission to do something, and a commission actually doing something do not necessarily mean the same thing.
Forbes goes even further to say if Gingrich got elected, first of all, and second of all, kept his promise to take more concrete action toward returning our economy to a gold standard, it would make his a presidency one of the “most remarkable” in the history of our country.