Sen. Ted CruzRafael (Ted) Edward CruzSchumer moves to break GOP blockade on Biden's State picks Bipartisan senators to hold hearing on 'toxic conservatorships' amid Britney Spears controversy GOP senators seek to block dishonorable discharges for unvaccinated troops MORE (R-Texas) has propelled the gold standard out of long political hibernation and into the 2016 presidential campaign. Donald TrumpDonald TrumpUN meeting with US, France canceled over scheduling issue Trump sues NYT, Mary Trump over story on tax history McConnell, Shelby offer government funding bill without debt ceiling MORE, Ben Carson, Sen. Rand PaulRandal (Rand) Howard PaulGOP political operatives indicted over illegal campaign contribution from Russian national in 2016 White House debates vaccines for air travel Senate lawmakers let frustration show with Blinken MORE (R-Ky.) and Mike Huckabee have spoken sympathetically about it. GOP voters do seem, at the very least, supportive of the gold standard.
So no wonder the left has taken out it’s long knives to attack. The New York Times, The Washington Post, LA Times, and CNN have attacked the gold standard recently. So have Salon and the Huffington Post. If Cruz wins in Iowa many more such attacks are to be expected. They’re ill founded.
The gold standard is not a kooky proposition or a device to privilege the rich over working people. That said, as attacks at Wall Street Journal and the center-right AEI show, the gold standard, so long out of the limelight, is rather poorly understood.
The gold standard endured liberal media ridicule during the 2012 presidential cycle where, for instance, Newt Gingrich campaigned in South Carolina for a gold commission (and won, before drifting off to moon colonies). Then the media went back to sleep. Journalists now are giving more attention to the gold standard than it has received in many years.
Let’s dispel some of the misconceptions.
The gold standard had, and again would have, nothing to do with carrying around purses of gold coins to pay for our groceries and gasoline. It just means that you can turn your dollars in at the bank, without charge, for a gold coin. Under the gold standard people used paper currency called gold certificates rather than “Federal Reserve Notes.” That’s all.
That worked well, keeping the dollar as good as gold and fostering decent prosperity, for almost 200 years. It didn’t, and wouldn’t, thwart prosperity by constraining the money supply. That’s pure myth.
The gold standard’s proponents prescribe it for ending secular stagnation. It is not being presented as an emergency recipe to avert imminent hyperinflation. Commentators who are fixated on its anti-inflation aspects are almost 40 years out of date.
It is not a survivalist or, with the possible exception of the great Ron Paul, even a libertarian idea. Key thought leaders include the respected Reagan Gold Commissioner, Lewis E. Lehrman, financier-philanthropist Sean Fieler (who chairs the American Principles Project which I professionally advise), media titan Steve Forbes, high tech savant George Gilder, and many others.
The gold standard is not even, strictly speaking, just for conservatives. President Grover Cleveland, a progressive Democrat, was strong for the gold standard. Properly done the gold standard is as good for labor as for capital.
The gold standard is essential to ending America’s “Little Dark Age” of economic stagnation. That stagnation first dawned with President Nixon taking us off what was left of the gold standard, in 1971. It has progressively gotten worse.
The dollar is the economy’s unit of account. An unreliable unit of account injects noise, rather than signal, into our economy. That slows growth and prejudices working people the worst. If the weight of the ounce or the length of the inch stopped being reliable shopping would grow much harder. The wobbly dollar causes comparable problems with the economy.
The National Institute of Standards and Technology does a splendid job defining the weight of the ounce and length of the inch. The Fed, whose job it is to manage the dollar, has made the dollar shrink in value by 85 percent since Nixon took us off the remnant of the gold standard. Restoring the gold standard quickly would fix that.
Why the superstitious fear of the gold standard? Prof. Barry Eichengreen, of U.C. Berkeley, mistook the mismanaged international “gold-exchange standard” of the interwar period with the true gold standard. He blamed the gold standard for the Great Depression. This mistake, the “Eichengreen Fallacy,” became fashionable among academic economists.
The true gold standard could not possibly have caused the Great Depression. It had ended well over a decade before the Great Depression, an early casualty of the First World War.
Monetary policy often has played a major role in presidential elections. It was a big deal in Reagan’s campaign against Carter. It was central to Cleveland’s campaign against Harrison and to McKinley’s against Bryan. The “good money candidate” beat the “easy money candidate” each time. Then the American economy thrived.
Ted Cruz has injected the gold standard into the 2016 presidential debate. Pay attention! Polling has shown the gold standard to be even more popular with African-Americans and labor union members than with conservatives (where it is plenty popular).
Should Cruz gain the nomination the gold standard could prove a powerful “secret weapon” in the general election. Upon election, going forward to a modern gold standard could prove a powerful way to restore the American Dream of prosperity, through honest labor, especially for working people.
Benko is the senior economic advisor at American Principles Project, a regular contributor to ThePulse2016.com, and an internationally published weekly columnist.