The word “bullshit” can’t be used enough in regards to the flat-earthers who talk about the importance of abolishing the Federal Reserve and moving the United States to a gold standard as currency.
Everyone who understands anything about macroeconomics knows these ideas are at best impractical and misguided, and at worst willfully damaging to the modern global economy.
But somehow, high-profile commentators continue to keep this disaster of idea alive. And the latest irresponsible column comes from John Carney at Net Net.
The gist of it? That critics of the gold standard may be right on the inability of gold to create price stability… but that’s not the point in the first place so forget about the inflation issue, guys.
Carney should be ashamed of himself. He is either being painfully naïve or actively deceptive by contending critics Matthew O’Brien and Paul Krugman miss the point when they claim to debunk the gold standard by debunking claims of price stability. According to Carney, price stability — or a greater control on inflation in plainer terms — isn’t the core issue of the gold standard according to Austrians you’ve never heard of … even though “real life advocates of the gold standard” pushing policy changes in 2012 America very much focus on the stability issue.
Here’s proof that price stability is at the core of the gold standard discussion according to two of the biggest proponents of this change. No they are not dead Austrian academics, but they are Americans at the core of the current American movement fo the gold standard — which is infinitely more important:
Ron Paul and Lewis Lehrman, In Their Own Words
Everyone should know by now that the last time a gold standard was seriously discussed was under Ronald Reagan, where a 15-member commission of economic experts (and some lay yahoos thrown in) debated the concept. The vote was overwhelmingly against the gold standard – with two members out of this group dissenting.
One was, no surprise, Congressman Ron Paul. The other was businessman Lewis Lehrman, a former Rite-Aid president… though how that qualifies him to be a monetary policy expert I have no idea.
Anyway, let’s start with Lehrman. What does he think about the gold standard in regards to price stability?
Check out this Newsmax.com interview that focuses mainly on inflation and the idea that the gold standard would control it. He actually says “the value of the dollar was stable” under gold and refers to “price stability in the long run,” phrases which say it all. Listen up starting at the 1:25 mark.
“Everyone who saved money in 1970-71 gets about 15 cents on the dollar today. That’s a scandal compared to the workings of a classical gold standard.”
“Those who are on wages, lagging wages, the lagging salaries, those who are on fixed income, or pensions, they cannot stay up with inflation because their incomes remain the same or their annuities or their retirement incomes remain the same or do not adjust upwards as fast as inflation.”
Oh yeah, and the headline on Newsmax.com is “Lewis Lehrman: We Need Gold Standard to Stabilize Dollar.”
See that word “stability” in there Johnny?
Ok ok, but that’s Lerhman. He’s since faded out of public view (even though he’s written a book on the gold standard recently to capitalize on the buzz) and not a great mascot. And maybe Newsmax was just hyping a headline out of context.
How about standard bearer Ron Paul, then?
Here are some remarks the Congressman said in one of his typically grouchy exchanges with Ben Bernanke (sourced through ABC News) back in February (bold emphasis mine):
Paul said that the Federal Reserve has “a responsibility to protect the value of the dollar” but without a consensus on the “definition of a dollar,” the dollar’s value cannot be sustained.
“Every single day it buys less the next day. To me it’s sort of like…a builder had a yardstick that changed its value every single day. I mean, just think of the kind of building we would have,” he wondered.
The fact that the dollar is buying less… hmm, could Paul be talking about STABILITY here?
And if you want a live look at the man himself, a more cutting (and very watchable) excerpt comes from this 2011 clip from the Colbert Report. I’d encourage seeing the whole thing:
At 1:37 – Colbert says “Sir, if we don’t have a gold standard for our money, could this lead to hyperinflation?” And Paul responds, “No not could, it is. It will.”
And then when the rational journalist Dave Leonhardt IMMEDIATELY counters by talking about how goldbugs are pushing the inflation angle, Ron Paul doesn’t dispute the fact that price stability is key here but rather he broadens the definition of price stability beyond even the cost of goods – at the 3:00 mark referencing the “Nasdaq bubble” or the “bubble in housing.”
Clearly, Ron Paul thinks price stability – not just for consumer goods but for stocks and real estate – is a crucial issue here.
Gold Standard Proponents are Full of Shit – and So is John Carney
John Carney may not be incorrect with some of his facts about long-dead Austrians. But in context of the year 2012 and the people and policies that matter now, he’s completely full of shit.
If inflation is not relevant to the gold standard, then next you’re going to tell me that the gold standard discussion is separate and wholly different than the “end the Fed” crowd, right? Come on, man.
Carney is actually, in my opinion, doing something far more heinous than falsifying facts: He falsifying an entire discussion and changing the relevant subjects away from points where critics have the high ground.
This kind of move-the-goalpost tactic is cowardly as well as damaging to any legitimate policy debate. It is the moral equivalent of picking a fight with your wife over who does laundry more often – and then when she counters by saying she has washed every pair of your underwear for seven years, you respond by saying “Oh yeah? Well who mows the lawn?”
Do you “win” the argument if your wife has never mowed the lawn? No. You look like a dick because you tried to weasel your way out of accountability by changing the topic from one you knew you were losing to one where you have an advantage.
Look, I know facts are dead (read the obituary here). I know we live in a post-factual age where “factual shortcuts” cannot ever be definitively labeled as wrong or untrue. And I know that, thanks to the internet, in the coming days there will be cutting rebuttals that debunk me and makes me look like a rank amateur who can’t hang in an intelligent discussion with a respected commentator on a big brand like CNBC.
But whatever. I have to call bullshit. Because that was this is.
Maybe that’s the only way to go when you live in an age of pigheaded dunderheads who are not only wrong and stubborn but deceptive in their rhetorical tactics. On matters of import like unemployment, government spending and the other great issues of our day we cannot afford to give dishonesty a seat at the table. There is far too much to do and far too many legitimate and principled concerns on both sides that demand our time.
So the gold standard is bullshit. And John Carney’s “defense” of the gold standard is equally bullshit.
Let’s move on to something that actually matters please. America has work to do.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.