“A gold standard would restore integrity and stability to the U.S. dollar and the international monetary system—qualities that have been sorely missing for years.” — Steve Forbes, Chairman and Editor-in-Chief of Forbes Media
In a year of remarkable market volatility, one asset class has quietly outperformed all others: gold. While the NASDAQ has declined 12.2% year-to-date, gold has surged an impressive 27.2%. This striking 39.4% performance gap tells a story that many economists and policymakers are reluctant to acknowledge—that in times of economic uncertainty, investors still turn to history’s most enduring store of value.
As the United States engages in increasingly contentious trade conflicts and government officials personally dabble in cryptocurrency markets, the case for returning to the monetary stability of a gold standard has never been more compelling. This shift would represent not merely a return to the past, but a forward-looking solution to modern economic challenges.
The Case for Monetary Stability
The largest proponents of returning to a gold standard include figures associated with the Austrian School of economics, free-market libertarians, and some supply-side economists. These advocates share a common belief that anchoring currency to gold could curb inflation and promote long-term economic stability.
The monetary stability argument is perhaps the most persuasive. Proponents argue that a gold standard, where currency is tied to a fixed amount of gold, would create a more predictable monetary system, significantly reducing the risk of inflation and currency devaluation that has plagued fiat currencies. When money is backed by a physical commodity with intrinsic value, the ability of central banks to expand the money supply becomes naturally constrained.
This connection to a tangible asset introduces a level of discipline to monetary policy that many economists believe has been missing since the Nixon administration formally abandoned the gold standard in 1971. In the five decades since, the purchasing power of the dollar has declined dramatically, while economic volatility has increased.
Reduced Government Intervention
The appeal of a gold standard extends beyond mere monetary stability. It represents a fundamental check on government power. By limiting the ability of governments to manipulate the money supply at will, a gold standard could potentially reduce economic instability and moderate the boom-and-bust cycles that have characterized modern economies. The gold standard would create a natural economic equilibrium that prevents both inflation and deflation while allowing for sustainable growth.
When governments can print money without constraint and officials engage in trade bargaining with obvious moral hazard, it inevitably creates temptations to solve short-term political problems at the expense of long-term economic health. Gold imposes discipline that politicians cannot easily circumvent.
Historical Context: Learning from the Past
Advocates for the gold standard often point to historical evidence to support their position. The classical gold standard era (roughly 1870 to 1914) coincided with a period of remarkable economic growth, price stability, and international trade expansion. During this time, major economic powers linked their currencies to gold, creating a de facto international monetary system that facilitated global commerce.
Jacques Rueff, who helped design the economic reforms that stabilized France in the late 1950s, famously declared that “the gold standard is the least imperfect of monetary systems.” Rueff’s advocacy was based on direct observation of monetary policy effects across different regimes.
Similarly, Philip Cortney, who served as President of Coty, Inc. and chairman of the U.S. Council of the International Chamber of Commerce, was a passionate defender of gold-backed currency. Cortney argued that abandoning the gold standard opened the door to chronic inflation, currency manipulation, and economic uncertainty—predictions that many would argue have been borne out in the subsequent decades.
The Cryptocurrency Connection
Today’s proliferation of cryptocurrencies—including those being developed personally by government officials—can be viewed as a symptom of declining trust in traditional fiat currencies. The attraction of Bitcoin and other digital currencies lies partly in their programmed scarcity, which mimics one of gold’s most valuable characteristics.
However, unlike cryptocurrencies, which can be volatile and lack intrinsic value, gold has maintained its purchasing power across civilizations and millennia. A gold standard would combine the stability of a time-tested store of value with the accountability of a transparent monetary system.
Addressing the Counterarguments
Critics of the gold standard raise several objections that deserve serious consideration. Perhaps the most common concern involves the limited gold supply and whether it could adequately back the world’s expanding economies. This critique overlooks the fact that a modern gold standard need not maintain a 100% backing ratio—historical gold standards often operated successfully with partial backing.
Additionally, some economists argue that a gold standard would hamstring central banks during economic crises by limiting their ability to expand the money supply. Yet this constraint might actually prevent the excessive risk-taking and moral hazard that often precede economic crashes, potentially resulting in fewer and less severe downturns overall.
Concerns about government manipulation of a gold standard system are valid but addressable through transparent accounting and international cooperation. Any monetary system, including our current fiat arrangement, is vulnerable to manipulation. The advantage of a gold standard lies in its greater public accountability and the physical constraints it imposes on monetary expansion.
A Path Forward
Transitioning to a gold standard would undoubtedly present significant challenges, requiring careful planning and international coordination. Yet the potential benefits—economic stability, reduced inflation, discipline in government spending, and increased public trust in the monetary system—might well justify the effort.
As the current economic landscape grows increasingly uncertain amid trade tensions, the stability offered by a gold-backed currency becomes more attractive. The remarkable outperformance of gold versus equities this year may be just the beginning of a longer-term trend that reflects growing doubts about the sustainability of our current monetary arrangements.
The wisdom of Steve Forbes and other gold standard advocates deserves serious reconsideration in today’s economic environment. Their vision of a stable, honest monetary system based on gold might provide exactly the foundation needed to navigate the economic challenges of the 21st century. By reasserting monetary leadership through a return to gold, America could once again establish itself as the true economic beacon for nations worldwide, creating the conditions for sustainable global prosperity. A gold-backed dollar would not only strengthen America’s economic sovereignty but would lay the groundwork for a more peaceful international order—one where financial stability fosters diplomatic cooperation and diminishes the economic tensions that so often lead to conflict. In this vision, America leads not through force but through the strength of sound money principles that benefit all nations.
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