Golden Rulers

Be careful what you wish for. You may get it.

The Law of Supply and Demand has not been repealed.

Self-interest trumps altruism

   Some call for using the gold standard to manage the economy. But this attitude conflicts with their claim that they are advocates of freedom and free market principles. Adhering to the gold standard limits a nation's freedom to control and manage its own economy. Why? Because nations lose the ability to control the money supply. Any attempt to return to the gold standard is doomed to failure, either in the attempt or in stifling economic growth.

   An economy grows when enough money circulates to satisfy demand for it. To increase growth, it is necessary to increase the money supply. If, however, the value and supply of money is tied to an international standard -- gold, for instance -- a nation loses the ability to control the supply of money, and in turn the ability to encourage economic growth.
   Put another way, a gold standard prevents national central banks from adjusting the money supply as needed, because it must instead keep its currency at a level that holds it to a specified internationally agreed value and volume. That is, the Federal Reserve could only arrange enough money to ensure that the dollar be able to buy X amount of gold. In turn, this limits the number of dollars in circulation, and fails to provide enough dollars to fuel economic growth.

   Money is the lifeblood of a modern economy. If it stops flowing, the economic heart stalls, and the body politic suffers.
   Some agency, then, must ensure that the economy has not only enough money, but that it keeps flowing.
   Conservatives and free-market economists maintain that this is the function and duty of bankers and financial institutions to keep money circulating. But for bankers, the prime directive is profit. If they feel a project will not succeed and the borrower will fail to repay, the loan will not be made.
   Multiply that by enough loan rejections and the money flow stalls, causing or aggravating a recession.
   So the combination of a return to the gold standard and bankers' reluctance to keep money flowing can only endanger an economy in precarious health. And with bankers also slowing the flow of money, the economy and consumers take a double hit.