by silverflake » Wed Mar 21, 2012 6:39 pm
DRP270, you bring up a good point about restriction of capital under a gold standard. Well put and this is truly one of the short comings of a gold standard. But, that potential economic challenge is completely negated by the fact that the gold standard puts the monetary power of the country in the peoples hands and causes the government to have to stay within their means (or at least the means of the system). It has been mentioned on many threads throughout this fine site that "in the old days" of the gold standard when when paper money circulated alongside silver and gold, the people, if they began to lose faith in the paper (even with the promise to pay the holder in gold and silver) could saunter up to the bank window and slap down a $20 bill and get an ounce (roughly) of gold in exchange to hold until their faith in government came back. I think that is an example of Gresham's law. It was the check that kept the government 'honest'. When that was stolen from U.S. citizens in 1933 by FDR, the control was stolen too and the government began it's legacy of devaluation. I'll take monetary integrity over temporary money supply/capital shrinkage/shortage any day because at the very least, though the situation you describe can be not pretty, under the gold standard, our liberties are preserved.
Ben Bernanke arguing against a gold standard is like a bank robber arguing against security systems. I know that a gold standard isn't perfect, but I would far rather have my money backed by gold than backed by the word of the biggest debtor nation in the history of the world.
