courtesy The Lehrman Institute
What the Gold Standard Is
The classical gold standard is simple and it works. It means that the American government defines its currency as a fixed amount of gold of a certain weight and purity. The classical gold standard does not mean that we will be carting around gold pieces in a purse like the nobles of Merrie Old England. We will still carry around currency, use bank accounts, checks, and credit cards. The classical gold standard simply means that you can, for any reason or no reason at all, cause your paper dollars and bank deposits to be exchanged for an equal value of gold dollars. That legal option keeps the currency honest, and valuable, causing no long term inflation or deflation, not least because the government is bound by the same law of convertability.
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What the Gold Standard Isn’t
The gold exchange standard nor the gold price rule are a true, classical gold standard. Other expedients, sometimes superficially resembling the gold standard like the “gold exchange standard” — a “grotesque caricature” of the gold standard which helped to cause the Great Depression — or a “gold price rule”, or a commodity basket or any other commodity — have severe inherent defects. They do not have the equal monetary properties exhibited by gold.
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Why America Needs the Gold Standard
The abandonment of the gold standard during the history of the 20th century resulted in manipulated currencies leading to a century of economic and civil strife, within nations, and to terrible wars between the great powers.
The gold standard is real money, acceptable from time immemorial, ruling out substantial and sustained deflation and inflation. The gold standard leads at home to peaceful cooperation and trade among diverse citizens. The international gold standard is the optimum non-national world currency which leads to cooperation among different sovereign countries and distinct cultures. Convertible currencies are the least imperfect vehicles inducing cooperation of competing interests, because, despite all national differences, each sovereign national currency is convertible to a neutral, common world currency – a specified weight unit of gold. Thus all currencies convertible to gold are mutually convertible to each other. Such an international monetary standard is beyond the control of any one country.
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The Gold Standard Solution:
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