The Case for Returning to a Gold Standard

The gold standard is dismissed by mainstream economists as an archaic relic, yet it provided monetary stability for centuries while fiat currency systems repeatedly collapse in inflation or hyperinflation. As central banks worldwide struggle with inflation despite unprecedented tools and PhDs, perhaps it's time to reconsider the wisdom of limiting government's ability to print money at will.

What the Gold Standard Actually Means

A gold standard simply means that currency is redeemable for a fixed quantity of gold. This ties the money supply to something real rather than to political decisions. Government cannot print gold, so under a gold standard, it cannot print money to fund spending beyond what it can tax or borrow.

This constraint is precisely what modern economists dislike about gold. They view the ability to "manage" the money supply as essential. But this management has given us persistent inflation, boom-bust cycles, and the transfer of wealth from savers to debtors (especially the biggest debtor: government).

The Austrian Case: Sound Money and Calculation

Ludwig von Mises demonstrated that economic calculation requires stable money. When the value of the measuring unit constantly changes, businesses cannot distinguish real from nominal profits. Malinvestment follows as apparent opportunities prove illusory once inflation is factored in.

Gold provides the stable measuring unit that rational economic calculation requires. The gold supply grows slowly and predictably—roughly 1-2% annually through mining. This modest inflation is far preferable to the wild swings of fiat currency managed by central banks responding to political pressure.

Historical Evidence: Comparing Monetary Systems

The classical gold standard era (1870-1914) saw unprecedented economic growth, rising living standards, and stable prices. Wars were limited because governments couldn't print money to fund them. Government debt remained modest because bond markets demanded discipline.

Since abandoning gold completely in 1971, we've experienced:

• Persistent inflation reducing the dollar's value by 85%
• Frequent financial crises
• Explosion of government debt
• Widening wealth inequality as asset prices inflate
• Perpetual wars funded by monetary expansion

This is not a coincidence. Fiat money enables big government. Sound money constrains it.

Common Objections Answered

"There's not enough gold." False. There's always enough gold—price adjusts. If currency is redeemable for 1/10,000 oz. instead of 1/35 oz., all that changes is the price level. The key is fixing the ratio.

"Gold standard caused the Great Depression." The Depression was caused by Federal Reserve mismanagement of the money supply—a fiat system problem. Countries that left gold earliest simply inflated fastest; they didn't recover faster.

"We need flexibility to respond to crises." This "flexibility" is a bug, not a feature. It enables monetary mischief: funding wars, bailouts, and political spending without corresponding taxation. Constraint is the point.

The Swiss Alternative: Competitive Currency

Perhaps instead of mandating a gold standard, we should simply allow it. Let currencies compete: fiat dollars, gold-backed notes, Bitcoin, whatever people want to use. The market will reveal which form of money best serves as store of value, medium of exchange, and unit of account.

This competitive approach honors both Austrian insights about emergent order and classical liberal concerns about liberty. No one is forced to use or refuse any money—people choose what works best.

History suggests gold would win this competition. But even if it doesn't, the discipline of competition would prevent the gross monetary mismanagement we suffer under monopoly fiat currency.