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Making the Transition to a New Gold Standard

Presented at the Cato Institute Annual Monetary Conference, 16 November 2011

Suppose for the sake of argument that we all agree to the following proposition: If we could change the monetary regime with zero switching cost, merely by snapping our fingers, we would prefer the US to be on a gold standard. In the most general terms a gold standard means a monetary system in which a standard mass (so many grams or ounces) of pure gold defines the unit of account, and standardized pieces of gold serve as the ultimate media of redemption. Currency notes, checks, and electronic funds transfers are all denominated in gold and are redeemable claims to gold.[1] The question then arises: What would be the least costly way for the United States to make the transition to a new gold standard? We need to choose a low-cost method to insure that the agreed benefits of being on the gold standard exceed the costs of switching over.

Two transitional paths suggest themselves. (1) One path is to let a parallel gold standard grow up alongside the current fiat dollar. (2) The more conventional path, as followed after the suspension of the gold standard during the US Civil War, is to set a date after which the US dollar is to be meaningfully defined as so many grams of pure gold. Or as it is more commonly put, an effective parity is established stipulating so many dollars per fine troy ounce of gold. In our present situation, where Federal Reserve liabilities (book entries and currency notes) and Treasury coins constitute the basic dollar media of redemption, that implies converting the Federal Reserve System’s liabilities and the Treasury’s coins into gold-redeemable claims at so many grams of gold per dollar (or equivalently so many dollars per ounce of gold).

We see analogs to these two transitional paths when we observe how peso-using countries have made the transition to using the US dollar. In Ecuador in 1998-2000, a parallel unofficial US dollar system emerged as the annual inflation rate in the local currency rose from low to high double-digits, then to triple-digits. The private sector of the economy was already heavily dollarized when the plug was finally pulled on the heavily depreciated local currency unit in 2000. In El Salvador in 2001, the government chose to permanently lock in the dollar value of the currency—by switching from a dollar-pegged exchange rate to outright adoption of the US dollar—while inflation was low and the local currency still dominant. In a nutshell, when the official switch to the harder currency came in Ecuador, it was an act of necessity in the midst of a hyperinflation crisis. In El Salvador it was an act of foresight, to rule out such a crisis.

Allowing a parallel gold standard

Clearing away the legal barriers to a parallel gold standard is fairly simple and can be done without immediately altering existing financial institutions. Rep. Ron Paul’s HR1098, the Free Competition in Currency Act of 2011, represents one straightforward approach. It would (1) ensure the enforceability of contracts denominated in units other than fiat dollars be removing legal tender status from Federal Reserve notes and Treasury coins, (2) remove taxes on gold and silver coins that FR notes do not face, and (3) remove sections of the US Code that have been used to criminalize the victimless activity of privately minting distinctive private pieces of metal intended to circulate as money.[2] If these steps seem unprecedented, note that Federal Reserve Notes did not become legal tender until 1933. Bank of England notes are not legal tender today in Scotland or Northern Ireland, where private banknotes (also not legal tender) predominate. Note also that in Switzerland “the purchase and sale of Gold is not subject to taxes (such as value-added tax or capital gains tax) under current Swiss law.” [3]

Further legal and regulatory changes are necessary to allow citizens who adopt the parallel gold standard to have access to gold-denominated banking services. Banking services, including the issue of gold-redeemable paper currency notes and token coins, are of special importance for the success of a gold standard given the awkwardness of making small transactions in physical gold coins. Either existing bank holding companies would have to be free to operate separate gold-denominated subsidiaries, or new gold-based institutions would have to be free to open.

The case for a level playing field between the fiat dollar and other monetary standards rests on the simple fact that the well-being of consumers is better served by competition than by monopoly. Keeping alternatives to fiat dollar at a legal disadvantage, like silver- and gold-backed bank-issued monies, or foreign currencies, limits the options of American consumers to their disadvantage. The option to use an alternative to the fiat dollar is naturally most valuable in an environment of high dollar inflation. Consumers who don’t like the ongoing shrinkage of the value of the currency in their pocketbooks and wallets are then not limited to complaining, or trying to lobby the Fed or Congress for better policy, but can “vote with their pocketbooks” to protect their assets by moving into less inflationary alternative currencies.

We should not expect a spontaneous mass switchover to gold, or to Swiss Francs, as long as dollar inflation remains low. The dollar has an incumbency advantage due to the network property of a monetary standard. The greater the number of people who are plugged into the dollar network, ready to buy or sell using dollars, the more useful accepting dollars is to you. Conversely, if you are the first on your block to go shopping with gold coins or a gold-denominated debit card, you will find few stores ready to accept payments in gold. But like the benefit from using dollars in a peso economy, the willingness to accept gold-denominated money in a fiat dollar economy increases with the incumbent currency’s inflation rate and its uncertainty. As Gabriele Camera, Ben Craig, and Christopher J. Waller express the general theoretical proposition, “the local currency sustains internal trade if the purchasing power risk is kept very low, but once that risk gets very high substantial currency substitution kicks in.” [4] Should the US inflation rate return to double digits, consumers would find it very helpful to have an alternative currency network available. Potential competition might even help incentivize the Fed to keep inflation low.

Who is likely to produce private gold coins once they are recognized as legal? Gold medallions and biscuits in various sizes, from private producers around the world, are already widely held. Investors in coined gold normally pay a premium over the value of uncoined gold, which covers the cost of coining. In a recent working paper Olivier Ledoit and Sébastien Lotz, two economists at the University of Zurich, raise an interesting possibility while discussing a proposal to allow private gold coinage in Switzerland. They envision that “Gold Francs would be minted by Commercial Banks, [and] the Banks would be allowed to put their brand name and/or logo on one side of the coin. The marketing benefits from having the bank logo in every citizen’s wallet would clearly cover any minting costs, so these coins could be sold at par value with the market value of their weight in Gold.”[5] It is actually not clear, but remains to be seen, that marketing benefits would cover minting costs. It is true that if the public prefers to use full-bodied coins, gold coins could circulate practically in larger denominations. Historically, however, the everyday circulation of gold coins became rare once people found banknotes more convenient and sufficiently trustworthy. At $1600 per ounce, full-bodied gold coins are completely impractical at perhaps $50 and below.

We can therefore expect most bank-issued coins to be tokens, essentially metallic banknotes, redeemable in gold (upon presentation of a minimum quantity) at the bank. Such tokens can carry the bank’s logo, but they will pay for themselves by sparing the issuer the expense of using precious metal in coin production, and will save the system the burdens of incidental wear- and-tear and deliberate shrinkage that accompany full-bodied precious-metal coinage. As with paper banknotes, the float revenue rather than only the advertising value will cover the production and circulation costs. Ledoit and Lotz appear to overlook the standard historical solution to the problem of keeping small currency at par—redeemable tokens and banknotes—because they assume that payment services would be provided only by money warehouses, and do not consider that money-users might be incentivized by banks to prefer the lower-cost alternative of fractional gold-reserve bank liabilities.

Re-establishing a gold definition of the US dollar

The network property of a monetary standard supports the case for not simply legalizing a parallel gold standard, but re-establishing a gold definition for the US dollar. If network effects mean that an uncoordinated piecemeal switchover to a superior standard would not occur except during a painful period of high and uncertain inflation in the incumbent standard, there is a strong case for avoiding that pain through a coordinated switchover before high inflation occurs. That is, we would do well to follow the Salvadoran model of transition rather than the Ecuadoran model.

In considering the re-establishment of a gold dollar now, more than forty years after President Nixon closed the gold window, the question of the appropriate new parity (how many dollars per gold ounce) naturally arises. It is widely recognized that it would be foolish to try to relink the dollar to gold at the pre-1933 parity of $20.67 per ounce, the 1934-71 parity of $35 per ounce, or the post-1972 accounting price of $42.22 per fine troy ounce. It would be foolish because the US price level has risen more than 5-fold since 1971, and the real price of gold has risen in addition, so that $42.22 per ounce or anything lower implies a massive deflation not anticipated in existing nominal contracts. Great Britain’s painful deflation during Churchill’s ill-considered attempt to return to gold at the pre-War parity, after its high inflation during the First World War, stands as a stern warning. The purchasing power of gold was greater in the rest of the world than in Britain at that old rate, gold accordingly fled Britain, and pound-sterling values faced inescapable downward pressure. Fortunately this point is widely appreciated today, and nobody advocates returning to such a low parity.

By similar logic, it would be foolish to declare a new parity of (say) $8000 per ounce, five times the current price. The result would be a sharp transitional inflation, and a very expensive importation of gold from around the world. Gold would rush in to take advantage of its higher purchasing power in the US, until the US price level rises approximately five-fold, to the point that $8000 no longer buys more than one ounce of gold.
The gold parity that would avoid any transitional inflation or deflation is something close to the current price dollar price of gold. “Close to” because there will be some change in the real demand for monetary gold following the stabilization of the gold value of the dollar. On the one hand, with lower expected inflation, the cost of holding non-interest-bearing money will be lower, and hence the real demand to hold money in the form of M1 dollars will rise. On the other hand, with dollar inflation risk dramatically reduced, the dollar-inflation-hedging demand for gold Krugerrands and Eagles and bullion will fall dramatically. The latter effect is likely to dominate, seeing that hedging demand is the main reason why the real price of gold is higher now than it was when the United States abandoned the last vestiges of gold redeemability in 1971.

Does the US Treasury own enough gold to return to a gold-redeemable dollar at the current price of gold? Yes, assuming that they have what they say they do. At a market price of $1600 per fine Troy oz. (to choose a recently realized round number) the US government’s 261.5m ounces of gold are worth $418.4b. Current required bank reserves are only $83b. Looked at another way, $418.4b is 19.9 percent of current M1 (the sum of currency and checking account balances), a more than healthy reserve ratio by historical standards.[6] Combined with the likelihood that US citizens’ hedging demand for gold will shrink by more than banks’ reserve demand will grow with larger real demand for M1 balances, I expect that the denationalization and remonetization of the US bullion stock at the current price would allow the US economy to export some excess gold. There will be a small transitional windfall for US citizens, getting imported goods and services in exchange for excess gold.

Expeditiously establishing a new gold definition for the US dollar thus requires the following two steps:
1) Withdraw most of the $1.6 trillion in non-required reserves that banks have accumulated since September 2009 by eliminating interest on reserves and selling the mortgage-backed securities that the Fed acquired in QE1, plus enough Treasuries to bring total bank reserves down to the current value of the US government gold stock.
2) Redeem Federal Reserve liabilities with the US government’s gold at the then-current market price.

Why not establish 100% reserves for M1?

$8000 is the approximate figure we get if we divide October 2011’s M1 ($2105b) by the stock of gold ounces held by the US government (261.5m oz.).[7] Some economists who favor 100 percent gold reserves for currency and checking accounts have offered this approach as the way to set a new parity. As noted above, however, such a high parity implies a large influx of gold from the rest of the world, a large loss of other US wealth in exchange, and a sharp transitional US inflation. The US cannot establish 100% gold backing for currency and checking accounts without great expense. (Even more expensive, because it implies an even higher dollar-per-ounce parity, would be to set the parity by dividing M2 or any broader aggregate by the existing stock of government gold.)

To be specific, at $1600 per ounce of gold, the difference between M1 (about $2.1 t) and the current stock of Ft. Knox gold (about $400b) is about $1.7t. American taxpayers would have to buy $1.7t worth of gold, a very expensive proposition. And that is only the one-time cost. In an economy with 3 percent per annum real GDP growth, assuming a flat trend in the ratio of gold to GDP, a constant purchasing power of gold implies the importation each year of 3% of the gold stock. For a gold stock of $2.1 trillion (100 percent of M1), that would mean an annual expense of $63 billion. With a 20 percent (or alternatively 2 percent) fractional reserve against M1, the annual expense would be one-fifth (or one-fiftieth) of that figure.

It should also be noted that with 100% reserves, the historically familiar sort of currency, circulating redeemable private banknotes and token coins, are infeasible. A money warehouse would be unable to assess storage fees on anonymous currency holders. Debit cards would still be feasible, but the warehouses issuing them would have to charge storage fees.[8]

What about the central bank?

Because the nation’s stock of money becomes endogenous under a gold standard, no monetary policy is needed.[9] Retaining a central bank committee to “manage” the gold standard undermines its automatic operation, creates uncertainty by opening the door to policies that lead to devaluation or suspension, and thus does more harm than good. A central bank inevitably faces political pressures to pursue monetary policies inconsistent with redemption for gold at a fixed rate. It can endanger or suspend redemption so with legal impunity, and it faces no competitive pressure to maintain its reputation. When the central bank runs a policy inconsistent with maintaining the gold standard, typically the gold standard gives. Competing private banks, which do face legal and competitive constraints, have a better historical track record than central banks for maintaining gold redemption.[10] The classical gold standard of 1879-1914 functioned quite well without a central bank in countries like Canada that did not weaken their commercial banks with legal restrictions. Even in the United States, despite several financial panics that (to judge from the Canadian example) could have been avoided by banking deregulation, the business cycle was not worse than it has been under the Fed’s watch since 1914. [11]

Nor does the gold standard require a central bank for other purposes. Many of the banks that issue checking accounts may also be relied upon to issue gold redeemable circulating currency notes, as they did before the Federal Reserve monopolized banknote issue, and token coins. The Fed’s other useful functions can be returned to private clearinghouse associations, namely the clearing and settlement of payments, the setting and enforcement of membership standards for solvency and liquidity, and the last-resort lending of temporary liquidity support to solvent member banks. Because their members’ own money is at stake and they cannot simply print fiat money, clearinghouse associations do not and cannot bail out insolvent banks at taxpayer expense, whether through direct capital injections, asset purchases at above-market prices, or loans at below-market rates.

The journalist Martin Wolf has written that “the obvious form of a contemporary gold standard would be a direct link between base money and gold. Base money — the note issue, plus reserves of commercial banks at the central bank (if any such institution survives) — would be 100 per cent gold-backed. The central bank would then become a currency board in gold, with the unit of account (the dollar, say) defined in terms of a given weight of gold.”[12] Actually, although irredeemable central bank notes are base money today, under a gold standard only coined gold and bullion reserves are base money. Notes in circulation are redeemable liabilities of the issuers and not part of actual or potential bank reserves. And although a currency board is less likely than a central bank to undermine the gold standard, there is no need for either. The most efficient form of a contemporary gold standard makes gold the base money, i.e. the medium of redemption and unit of account, while currency and other common media of exchange are the fractionally backed gold-redeemable liabilities of commercial banks. Wolf rightly recognizes that “It is wasteful to hold a 100 per cent reserve in a bank, if depositors do not need their money almost all of the time,” but does not draw the obvious conclusion that “a currency board in gold” is therefore less efficient than fractional-reserve banking under a gold standard. [13] Wolf expresses the common worry that “Such a system is unstable. In good times, credit, deposit money and the ratio of deposit money to the monetary base expands. In bad times, this pyramid collapses. The result is financial crises, as happened repeatedly in the 19th century.” But the banking system is more robust than he suspects, as seen in Scotland, Canada, Sweden, and other less-regulated systems without central banks under the gold standard. Repeated financial crises were a feature of the nineteenth-century banking systems in the United States and England, weakened as they were by legal restrictions, but not of the less restricted systems elsewhere.[14]

Barry Eichengreen’s recent critique of reinstating the gold standard

In a recent critique of proposals for reinstating a gold standard, the economic historian Barry Eichengreen has repeated the often-made but nonetheless absurd claim that a gold numeraire is equivalent to a commodity price support, writing: “Surely a believer in the free market would argue that if there is an increase in the demand for gold, whatever the reason, then the price should be allowed to rise, giving the gold-mining industry an incentive to produce more, eventually bringing that price back down. Thus, the notion that the U.S. government should peg the price, as in gold standards past, is curious at the least.”[15] Surely Professor Eichengreen understands that if there is an increase in the demand for gold under a gold standard, whatever the reason, then the relative price of gold (the purchasing power per unit of gold over other goods and services) will in fact rise, which will in fact give the gold-mining industry an incentive to produce more, which will in fact eventually bring the relative price back down. That one unit of gold continues be worth one unit of gold does not involve the pegging of any price.

“More curious still,” Eichengreen continues, “is the belief that putting the United States on a gold standard would somehow guarantee balanced budgets, low taxes, small government and a healthy economy.” Of course “guarantee” is too strong a term, and a budget balanced each and every fiscal year is not the right goal. But a gold standard does help to ensure budget balance in the desirable present-value or long-run sense, by requiring a government that wants to sell its bonds in the international market to stay on a fiscal path consistent with full repayment in gold.[16]

“Most curious of all” to Eichengreen “is the contention that under twenty-first-century circumstances going back to the gold standard is even possible.” This time is somehow different, apparently. But going back to the gold standard by re-establishing a dollar-gold parity requires today only what it has always required: (1) a sufficient real gold stock, which as shown above the US government already has on hand, and (2) the political will to do so. Developing a parallel gold standard, using present-day technologies for money transfer, would probably be easier today than it has ever been.

[1] For the generic definition and supply-demand analytics of a gold standard see Lawrence H. White, The Theory of Monetary Institutions (Oxford: Basil Blackwell, 1999), ch. 2.
[2] See Lawrence H. White, “Statement on HR 1098, The Free Competition in Currency Act of 2011,”
[3] Olivier Ledoit and Sébastien Lotz, “The Coexistence of Commodity Money and Fiat
Money, University of Zurich Department of Economics Working Paper No. 24 (August 2011), p. 2.
[4] Gabriele Camera, Ben Craig, and Christopher J. Waller, “Currency competition in a fundamental model of money,” Journal of International Economics 64 (Dec. 2004), pp. 535–36.
[5] Ledoit and Lotz, op. cit., p. 5.
[6] Note: In counting all the gold as bank reserves I’m assuming that coins in circulation would become redeemable tokens, not become full-bodied gold coins. The current numbers update Lawrence H. White, “Will the Gold in Fort Knox Be Enough?” in Prospects for a Resumption of the Gold Standard: Proceedings of the E. C. Harwood Memorial Conference [Economic Education Bulletin vol. 44, no. 9] (Great Barrington, MA: American Institute for Economic Research, 2004), 23-32.
[7] The Fed’s gold certificate entry as reported on its balance sheet (H.4.1, 6 October 2011) is $11,041 million, the product of the bookkeeping price of $42.22 times 261.511 million oz. Au. See also Federal Reserve Bank of New York, “The Key to the Gold Vault” (2008), p. 17, which notes: “A majority of these reserves are held in depositories of the Treasury Department at Fort Knox, Kentucky, and West Point, New York. Most of the remainder is at the Denver and Philadelphia Mints and the San Francisco Assay Office.” I ignore the US share of IMF gold.
[8] Lawrence H. White, “Accounting for Fractional-Reserve Banknotes and Deposits,” The Independent Review 8 (Winter 2003), pp. 423– 441.
[9]As Alan Greespan told Jon Stewart on the Daily Show, 19 Sept. 2007: “You didn’t need a central bank when we were on the gold standard, which was back in the nineteenth century. And all of the automatic things occurred because people would buy and sell gold, and the market would do what the Fed does now.”
[10] George Selgin and Lawrence H. White, “Credible Currency: A Constitutional Perspective,” Constitutional Political Economy 16 (March 2005), pp. 71-83.
[11] George A. Selgin, William D. Lastrapes, and Lawrence H. White, “Has the Fed Been a Failure?,” Cato Institute Working Paper no. 2 (November 2010), forthcoming in Journal of Macroeconomics.
[12] Martin Wolf, “Could the World Go Back to the Gold Standard?,” Martin Wolf’s Exchange blog (1 Nov. 2010),
Wolf incidentally remarks that “Economists of the Austrian school wish to abolish fractional reserve banking,” but this is true only of a fraction of Austrian-school economists.
[13] See Kevin Dowd, ed., The Experience of Free Banking (London: Routledge, 1992); also George Selgin, “Bank-lending ‘Manias’ in Theory and History,” in Selgin, Bank Deregulation and Monetary Order (London: Routledge, 1996).
[14] Barry Eichengreen, “A Critique of Pure Gold,” The National Interest (Sept. –Oct. 2011),
[15] The recent Nobel laureate Thomas Sargent made this point in “An Interview with Thomas Sargent,” The Region (Federal Reserve Bank of Minneapolis), September 2010.

  • A fantastic (as expected) explanation of the issues involved in restoring the gold standard.

    Only one quibble really: still no analysis of the function and economics of the gold stock under the gold standard, and the role of the nominal interest rate in allocating the stock of gold among agents. Where this is missing is the discussion of the requirement to have a gold stock to restore the gold standard. The way the discussion is presented, should the stock of gold be insufficient, one may have to conclude (wrongly) that it would not be feasible to restore the gold standard. However, it is incorrect to assume that any stock of gold is as good as any other stock of gold, as some Rothbardians do.

    Whatever the stock of gold under a gold standard, it must be willingly held by someone. The opportunity cost for any person holding any of his asset portfolio in gold is the nominal interest rate he could get from holding an interest bearing claim on a bank. Given that the function of the gold stock is to facilitate redemption and other money uses of gold, and also given the 'anchor' of the equilibrium real price of gold (always mentioned by White in his analysis), and the principle of diminishing marginal returns, it follows that the marginal return on holding gold is a decreasing function of the stock of gold in a closed economy on a gold standard. Since the nominal interest rate is the cost of holding gold, it is also its market price under free banking. So, other things being equal, the larger the gold stock the lower the nominal interest rate.

    It follows that an inefficiently low gold stock implies a high interest rate to ration the limited stock of gold to those most willing to hold it. This does not make it infeasible to restore a gold standard if it would result in these conditions, only that the initial conditions are sub-optimal and that something must change to bring the system to its optimal level of gold stock.

    A high interest rate as a result of a low gold stock sets in process a process of re-allocating society's capital stock from other forms such as buildings and equipment to gold coin. The viability of investing capital in new buildings and equipment depends on the interest rate — the higher the interest rate the less viable such investments are. Less demand for constructing buildings and equipment leads to price deflation — an increase in the real price of gold. A higher real gold price creates a surplus in the gold market, i.e more mining supply, and less consumption in making things that include gold. The suplus increases the gold stock, which brings things back to optimal in terms the allocation of capital between gold and buildings etc. however it leaves the real price of gold above equilibrium and the gold market in surplus.

    The gold stock therefore continues to increase and the interest rate continues to fall, resulting in investment in buildings etc. being more viable. Inflation results, reducing the price of gold and bringing the gold price back to equilibrium.

    Analysis of both stocks and flows in the gold market under a gold standard, as sketched above, indicates a cyclical process of adjustment through time towards both equilibrium gold price and gold stock (if the amplitude of the cycle is decreasing through time).

    Why not consider an analysis or market model incorporating both stocks and flows?

    • If the stock of gold is so low that holders of gold may demand a very high premium to surrender their gold for use as money (or to provide liquidity to gold bankers issuing promissory notes), why wouldn't people, including bankers issuing promissory notes, choose to use something else as their standard of value rather than pay the very high premium? Why wouldn't people use silver instead for example? And if silver also demands a high premium, why wouldn't people switch to platinum? If platinum demands a high premium, why not a petroleum commodity?

      • Historically it's been the other way around. Gold and silver coins were used in commerce before substitutes such as demand deposits and promissory notes were developed, and then it's a question about how far those substitutes can carry commerce, and by implication how small the stock of gold and/or silver can become. White elsewhere correctly points out that even if the stock of gold and/or silver were to reach zero, the monetary system would still be anchored by the equilibrium real price of gold and/or silver. What he has not discussed is why the gold stock will not reach zero and the role of the interest rate in regulating the stock of gold.

        • Historically, all sorts of things have been monetary tokens and standards of value. History does not begin with a state imposing a legal tender and collecting taxes in it. Gold was never a common tender anywhere, except where it was easily found, because it is too scarce and too easily hoarded by the most powerful armed men. Why else is so much of it at Ft. Knox now? By White's account, I may have a gold standard when the men controlling Ft. Knox allow me to have one. Why would I want a standard of value on these terms?

          Again, if monetary gold becomes scarce, why would I not choose a different standard of value? This question is plainly before you, but you don't address it. Why? Everyone reading the forum with an open mind sees the question.

          I like almond milk, but if the price of almond milk becomes too great, I need not economize on other things to obtain it. I may switch back to dairy milk instead, or I may drink soy. With gold, you say I must pay higher rents on gold so solvent but illiquid banks issuing promissory notes can reduce demands for redemption, but why is that? Why do I need gold so desperately?

          The answer is taxation and similarly imposed rents. A statutory gold standard is not impossible. That's not the point. The system you describe presumes a monopoly, so it's not very free, and it's not my preference.

      • Larry White

        I don't understand what you mean by "premium". Could you explain? Do you mean that the purchasing power of gold (other goods per oz. Au on the market) is high? If so, your argument doesn't make sense. If you have to pay a large amount of goods to get a gold coin, you also get a large amount of goods when you spend the coin. Do you mean that interest rates are high? If so, your argument doesn't make sense. So there must be some third meaning. What is it?

        • Yes, the purchasing power of gold is higher, because people demand gold more highly compared with other things.

          People demand gold more highly compared with other things, because men with guns threaten to harm people who do not regularly present gold to the men. These men do not similarly threaten to harm people for failing to present other things to them, so they do not similarly raise the value of other things.

          The "other things" here are other standards of value excluded by the statutory gold standard. The issue is not what I exchange for gold before exchanging gold for something else. The issue is gold as a standard of value compared with something else as a standard of value. The problem with gold as a standard of value is that powerful men may increase its scarcity by hoarding it.

          These hoarders are not outside of the state. They are inside of the state. Paul discusses the confiscation of gold by Roosevelt in the thirties (laughably) to "prevent hoarding". Roosevelt himself was obviously hoarding gold; otherwise, where did all the gold in Ft. Knox come from?

          • Clearly Martin Brock is accepting, perhaps arguendo, my hyphothesis when he wrote: 'If the stock of gold is so low that holders of gold may demand a very high premium to surrender their gold for use as money (or to provide liquidity to gold bankers issuing promissory notes), choose to use something else as their standard of value rather than pay the very high premium? '

            He can only be referring to the stock of the monetary commodity being so low that banks etc. have to pay a high interest rate to retain any of it in their treasuries. He expressly suggests that this problem could lead to a switch of the standard. He does not mention anything about or allude to the real price of gold because that is not what he is talking about. The premium he is referring to is the gold interest rate premium at the time the standard was re-introduced compared to what it would be if the stock of gold were at its equilibrium or optimal level given the available capital stock and the demand to hold gold coin.

            I don't know why Martin Brock is now changing what he said in response to White.

            I continue to wait for White to respond to my suggestion that he needs to incorporate both stocks and flows in the gold market, and analyse the interest rate and the allocation of the capital stock between gold and other capital investments.

            It appears he has time on Christmas day to confuse and respond to Martin Brock's response to my analysis but not to respond directly on my analysis in years. Why not engage me Professor White?

          • Larry White

            A stock-flow analysis is exactly what I attempt in The Theory of Monetary Institutions, ch. 2. I didn't have space in the paper, so I cited my treatment there.

          • He can only be referring to the stock of the monetary commodity being so low that banks etc. have to pay a high interest rate to retain any of it in their treasuries.

            People demanding redemption reduce the stock of monetary gold. Solvent banks paying more to rent gold (paying people not to exercise an option to exchange banknotes for gold) could reduce this demand. I don't deny this point. It's not relevant to my point.

            He expressly suggests that this problem could lead to a switch of the standard.

            I ask you why it wouldn't, and you ignore the question. You still ignore the question.

            If I must pay a very high rate of interest to borrow notes promising gold (and requiring me to return notes promising gold), why would I not borrow notes promising silver instead? If borrowers generally prefer notes promising silver, why would a home owner not accept these notes? These questions have answers, but "the market prefers gold" is not the answer.

            He does not mention anything about or allude to the real price of gold because that is not what he is talking about.

            I'm not sure what "real price of gold" means, but I am discussing a real demand for gold, a demand created by a state commanding people to seek gold.

            If no state commands anyone to seek gold, I have no problem with anyone extending credit by accepting notes promising gold, but I don't expect these notes to become a common currency, because common people have little gold. Furthermore, common people do not trust the people (within the state) having much gold, so they prefer to promise something else when accepting credit.

            The premium he is referring to is the gold interest rate premium at the time the standard was re-introduced compared to what it would be if the stock of gold were at its equilibrium or optimal level given the available capital stock and the demand to hold gold coin.

            No. I refer to a premium for gold over silver or another standard of value created by a state commanding people to seek gold to pay taxes and similar rents and not similarly commanding people to seek the other standard.

            I don't know why Martin Brock is now changing what he said in response to White.

            I haven't changed what I said.

      • So as to not ignore your question, clearly this could be a motivation to switch standards. However, in practice it isn't because before a standard can be used as the standard for discharge of demand deposits and bank notes the commodity must pre-exist and be sufficient to carry the pre-existing commerce intermediated by money. The potential for rising interest rate on the monetary standard commodity implies that a demand to hold this asset still exists, and that its stock will not go to zero. It may, however, temporarily go below its optimal stock level, however the higher interest rate results in deflation and eventually a surplus in the market, increasing the stock over time.

        Demand for the monetary commodity we are referring to is demand to hold it, not just to tender it. Tender does not require one to hold it for anything other than a short period of time. In fact, with banking institutions available, the obligation to pay gold is discharged by book entries or on a net basis, or by tender of negotiable instruments (bank notes), reducing the stock of gold required to service transactions. This applies to both private sector demand to discharge contracts in gold as well as government requirements for the same. It is only if the government requires one to hold gold that the government is adding to demand to hold gold. In summary, the demand to use gold as a standard is not the same as the demand to hold gold.

        I think White and I are supporting the use of gold as a standard rather than supporting or requiring people to hold their savings in the form of metal. Our support of the standard is based on the belief that this is what market demand supports rather than as a government mandate.

        • So as to not ignore your question, clearly this could be a motivation to switch standards. However, in practice it isn't because before a standard can be used as the standard for discharge of demand deposits and bank notes the commodity must pre-exist and be sufficient to carry the pre-existing commerce intermediated by money.

          That's a very complex description of a very simple transaction, seems to me. I can extend you credit by accepting your notes promising silver or grade A whole milk or anything else I choose right this minute. If my neighbor also accepts your notes to mow my lawn, the notes are money betwixt the three of us. Any pre-existing commerce intermediated by money is irrelevant.

          The potential for rising interest rate on the monetary standard commodity implies that a demand to hold this asset still exists, and that its stock will not go to zero.

          If I'm less inclined to accept notes promising silver because an armed man regularly demands from me notes promising gold, then the slope of the supply curve relating the supply of gold to the market rent on gold is steeper.

          It may, however, temporarily go below its optimal stock level, however the higher interest rate results in deflation and eventually a surplus in the market, increasing the stock over time.

          There is no optimal stock level or equilibrium interest rate independent of related factors like armed men regularly demanding notes promising gold from everyone within the borders of the United States. Without these armed men demanding gold, your analysis is fine, but it's not relevant to my point.

          If some people accept the promise of gold when extending credit, these specific people constitute a market for monetary gold, and laws of supply and demand apply to this market. That's fine with me.

          Laws of supply and demand also apply to my consumption of almond milk, but if armed men regularly compel me to obtain dairy milk and deliver it to them, even though I prefer almond milk, this compulsion clearly affects the price of dairy milk, even if I don't hold the milk very long.

          It is only if the government requires one to hold gold that the government is adding to demand to hold gold.

          If I must regularly deliver gold to someone, regardless of my preference, then I must obtain gold for this purpose and hold it for some period of time.

          In summary, the demand to use gold as a standard is not the same as the demand to hold gold.

          The two are not the same, but I cannot deliver gold to you without first holding it myself, and I must deliver upwards of half of my income to you this way. [You are all levels of the state here.] I have these notes promising gold around all the time, so they end up as my money. That's the point.

          I think White and I are supporting the use of gold as a standard rather than supporting or requiring people to hold their savings in the form of metal.

          I also support the use of gold as a standard by anyone freely choosing to use gold as a standard, but I don't freely choose to use gold as a standard. Why would anyone want to compel me?

          Our support of the standard is based on the belief that this is what market demand supports rather than as a government mandate.

          Fine. We can perform this experiment easily enough. The Treasury needn't convert its promises to pay fiat dollars into promises to pay gold at a fixed price for this purpose, and I don't want the Treasury converting its promises this way, because I don't want people holding Treasury notes to benefit from holding them. I want people holding entitlement to my children's tax revenue to rue the day they bought it.

          • Mr Brock you are combining a few issues together that White is treating as largely separate issues. Whether taxes are being collected and the form of payment of taxes could impact on the demand to hold the medium of tax payment, but even then there is still an equilibrium in the market for money. That the equiilibrium would be at least somewhat different is largely beside the point of what White is writing about here.

            I understand that the principal issuers of bank notes in the United States of America are the Federal Reserve Banks, which hold a rather mixed portfilio of financial assets these days, with the US Federal government holding the remaining gold reserves. To replace this with a system of private commercial bank note issuers who would also hold any gold reserves they wanted to requires effectively the liquidation of the Federal Reserve Banks and the US Federal Government gold holdings, rather than the liquidation of the US Federal government. White correctly points out that such an effective liquidation would involve selling all the assets of the Federal Reserve Banks, not just indirectly paying out the gold reserves. The result would be that all demand deposits and bank notes would be claims on private commercial banks rather than claims on a statutory entity, and the US Federal government would have to meet any loss of funding by issuing more bonds. Whether holders of those bond are ever going to get paid or whether they deserve to be paid is not of great relevance to the debate.

          • A statutory gold standard increases demand for monetary gold, so it establishes a market in which gold is more attractive than other standards of value. White acknowledges the incumbency and network effects leading to the dominance of a single currency. By tipping the balance in favor of gold, statutory force practically guarantees that gold dominates. We'll be no freer after this transition.

            If a monopolistic legal tender has not this effect, why are we having this conversation at all? Why is the fiat dollar, with all of its obvious deficiencies, the dominant currency in the United States? Why don't we stop using it right now?

            White writes about converting Treasury obligations from obligations to deliver fiat dollars to Treasury holders to obligations to deliver gold at a fixed price. Since the value of all Treasury securities rivals the value of all shares of all of the S&P 500 companies (and the value of these companies is 80+% of the value of all publicly traded companies in the U.S.), the effect of this conversion must be huge.

            As a general proposition, I don't want the Treasury selling entitlement to revenue from taxes imposed on my children to finance insane expenditures actually reducing my children's capacity to pay the taxes, but if the Treasury must impose this burden, let it sell entitlement to increasingly worthless fiat dollars. If you only prefer to hold gold, you don't need the Treasury for this purpose, so why would you want this conversion?

            The holders of reserves at the Fed are exclusively Federal Reserve Banks, and White proposes to give them all of the gold in Ft. Knox. Why? If my child today contracts for a 30 year mortgage at four percent interest repayable in fiat dollars, quite rationally expecting inflation to decrease the value of the dollars long before he repays them, is he suddenly and retroactively to be required to repay the loan in gold instead? This proposition does not appeal to me.

            I rather propose that my children owe only the fiat dollars they contracted to pay. Let the Treasury distribute the gold in Ft. Knox through a payroll tax rebate.

            Federal Reserve Banks hold many Treasury securities promising a stream of fiat dollars. Let them go on holding these securities while the state withdraws the fiat dollar's monopoly without any preference for gold as a standard of value. If people then abandon these banks in droves, I don't care. If a $10,000 Treasury note becomes worth a gallon of milk overnight, I don't care. In fact, this change is cause for jubilant celebration. If you fear it, buy milk or gold or silver or anything else you prefer with your fiat dollars now.

            Of course, the Federal government's bond holders will be paid. The Federal government has nuclear weapons and is quite willing to use them to incinerate hundreds of thousands of innocent men, women and children. It has already demonstrated this willingness.

    • In other words, don't you assume not only a monetary system with a gold standard but also a monopolization of money by this system?

      • A monopoly is a market with one seller, not a market that has converged on a single standard. We are assuming that a mono-metallic gold standard is what the market has and would re-converge on.

        • "One seller" need not describe a single person. It can describe a corporate collective or a class of people with exclusive, statutory rights, like the Federal Reserve system.

          If you're assuming market convergence, you need to explain to me why I would not switch from gold to silver when gold becomes too dear. I'm assuming what Larry White describes above, and he describes some system decreed by men controlling Ft. Knox.

      • Larry White

        No. Where's the monopoly? There can be many mines, many mints, and many banks of issue.

        • The monopoly is the state's. Only the state may demand taxes payable exclusively in gold or notes promising gold, and only the state may sell entitlement to the tax revenue. When a state commands a huge share of all produce (as government at every level does in the U.S.), this monopolistic preference for gold alone is enough to exclude other currencies. Even if a state commands a much smaller share of produce, this preference is enough.

          "Many mines" only begs the question. Competition among gold miners doesn't change the fact that gold bankers monopolize money. There may be many silver mines, and there may be many dairy farmers. The question is: why is silver not my standard of value? Why not grade A whole milk? I can promise to obtain milk in the future, and we can bargain with these promissory notes. I can promise an index of agriculture commodities, a standard basket of food. I expect to consume food in the future. What do I really need with gold?

          Since we're all classical liberals here, why not some sort of labor commodity as a standard of value? I'm hardly the first to ask this question. "The market" doesn't answer the question. Markets didn't settle on gold historically, except in the context of states commanding gold as a legal tender. You don't describe a market settling on gold above. You describe a state selling entitlement to confiscated (taxed) gold. I'm not exaggerating one iota. That's precisely what you describe. I only call a spade a spade.

          The answer under a statutory gold standard is that gold exclusively is a legal tender. I must pay taxes and many other rents in this currency, so I must also trade my produce for it, and others are similarly constrained, so if I need credit from others, I must also borrow this currency. Where is the "freedom" in this formulation?

          If the state commands notes promising grade A whole milk, I seek these notes instead. At least, milk is not easily hoarded at Ft. Knox, as gold by your own account clearly is.

    • Larry White

      A stock-flow analysis is exactly what I attempt in The Theory of Monetary Institutions, ch. 2.

  • You argue well that replacing the fiat dollar with a gold standard is practical, but I cannot accept the initial proposition, i.e. I do not prefer the U.S. to be on a gold standard. I want free banking but not a statutory gold standard. I don't even want gold as an exclusive legal tender for paying taxes and other direct obligations to the state.

    I don't want the U.S. on any standard imposed by a central authority, even if I am the central authority. I prefer to choose my standard, and I prefer you to choose your standard. If we choose different standards but I will accept yours in lieu of mine at some rate of exchange that I choose, then we may still engage in monetized commerce; otherwise, we may only barter. This freedom to choose a standard (among other things) is what "free banking" means to me.

    In this more liberal system, one standard of value might ultimately dominate, but no central authority imposes this standard, and I don't expect gold to emerge as the most widely accepted standard. I'll discuss my reasons for believing so if anyone is interested, but I resist any standard of value imposed by a central authority, including my own preference. Gold was a widely accepted standard in the past largely because states effectively imposed it, not because it best suits the freest possible market.

    I oppose converting the Treasury's liabilities to gold redeemable claims, even at the current price of gold. I want the Treasury to default instead, either directly or by inflating the fiat dollar (preferably the former). I don't want my children to repay the cost of the Iraqi occupation. They were all minors at the time, and I opposed the occupation from the outset. I rather want anyone who bought entitlement to taxes imposed on my children to lose their "investment". I don't expect this outcome, but I prefer it. I might rather expect my children to leave the United States at some point, as my ancestors left Europe a few generations ago, if they only had somewhere freer to go.

    That said, I prefer your path (1), but I don't expect the path to lead where you presume it to lead. I don't want [i]only[/i] a parallel gold standard to grow up alongside the fiat dollar. I want [i]any[/i] standard of value that people freely choose to compete with the fiat dollar. I would not exclude gold, but I certainly do not want a system permitting a gold standard and the fiat dollar but excluding all other alternatives. This system clearly presents a false choice.

    Silver is not my preferred standard either, but even the U.S. Constitutional system as interpreted by Ron Paul permits a silver standard as well. In fact, silver is the historical dollar standard. Gold is the afterthought.

    A level playing field between the fiat dollar and other monetary systems is my preference, but "other monetary systems" does not describe a gold standard excluding other options.
    A statutory gold standard is not a free banking system. It is a statutory gold banking system.
    A bimetallic standard (fixing the gold/silver exchange rate) is worse. A system permitting both gold and silver standards (and only these two standards) without fixing an exchange rate is only a little better. None of these systems is very free.

    Coins and paper notes are increasingly inconsequential. Free alternatives to fiat money will emerge first among the wired generation. They'll use the alternatives online. For brick and mortar shopping, they'll eventually use mobile devices like smart phones. Credit and debit cards are also increasingly obsolete, but we're closer to the beginning of their obsolescence. For electronic transactions, a smart phone is superior to a credit card, and before long, practically all transactions will be electronic. Most transactions are electronic now.

    So stop worrying about the Treasury and the Fed and some statutory path away from the fiat dollar and toward a gold standard. Think instead of entrepreneurial paths to any of the alternatives. An idea whose time has come …

  • Why gold? Why not just remove the legal barriers and see what people choose to have their money backed in (for example maybe nothing but bank assets (loans, buildings, stock)). The par could evolve.

  • harrydavid1

    Prof. White, you talk a bit about the merits of a banking system that is unhampered by legal restrictions and that has no centralized, discretionary lender-of-last-resort, i.e., a central bank; in particular, Canada before 1914.

    The Canadian case is perhaps interesting in the following period, during and after WWI, although perhaps the interest is not relevant exactly to your post about the workings of a gold standard (but perhaps it is relevant).

    Canada did not have a central bank but it was not on the gold standard from 1914 to on or near 1927; and the chartered banks did have access to a discount window at a board in the government's Department of Finance. Canada did experience high inflation in at least the early part of this period (memory fails about the later part of this period).

    I guess if I were to try to draw up a proposition about monetary institutions, and central banking and the gold standard in particular, from the Canadian experience I might want to say that a system is unstable, politically, when the banking system is free of the constraint of redemption of currency for base money, and when it also has a near-automatic means of discounting bills for currency. This is a speculation about the causes of the introduction of a discretionary central bank.

    This post is at best very tangential to your discussion, I see after writing it. My apologies if that may make it inappropriate to post it here. Also, caveat: my memory of the facts of this case is somewhat hazy.

  • Paul Marks

    Of course the pure libertarian position is indeed that people (buyers and sellers – by voluntary agreement) should decide what they want to use as money. The retrospective voiding of the gold clauses in private contracts by the Roosevelt regime in 1933 (and the submission to this by the majority of the Supreme Court in 1935) is often cited as the end of the American Republic (at least in the sense of the end of a limited government under the "rule of law" as opposed to just being a country that has endless "laws"), but it would have been just as terrible if the money that people had chosen had been silver (or…..) rather than gold.

    However, gold has a long history of being used as money and has physcial advantages for use as money, so it is likely that people would choose to use it as money. As for private coins – they indeed have a long history and private mints lived (or died) by their REPUTATION and so were not in the habit of debasing the coinage. Had private mints not been banned by Congress in the 1850s there is no reason to suppose that they would not still exsist. And if that ban was lifted it is quite likely that private mints would quickly be restablished.

    Also enterprises would offer notes and credit card services (and so on) for people who did not wish to carry around physical gold (or whatever commodity was chosen as money) around with them. Thy physical gold (or….) would be kept in the vaults of the enterprise offering the service – and they would CHARGE for this (as safe deposit box enterprises do today). If people (on the other hand) agreed to have their gold lent out they would not be charged (indeed they would be paid interest), BUT they would also be told that they did NOT have gold "on deposit", because they had agreed to have the gold lent out.

    Unless we are dealing with spooky stuff (the Devil in theology – or certain particles in QM physics) the same thing can not be in two different places at the same time. So money (in this case gold) can not both be "on deposit" and lent out – at the same time. If it is "on deposit" the saver should pay the bank for looking after the money (and providing it via machines and so on). And if lent out (so that the saver AND THE BANK may earn interest) then the savers must accept the risk that the money may be LOST (not repaid by the borrowers). One can sensibly insure against fire and flood (and so on), but clearly trying to take out "insurance" against bad business judgements (i.e. banks lending to borrowers who do not repay the money) makes no sense. So called "deposit insurance" (which is really "insurance" of money that is lent out, not money that is "deposited") is not a sensible concept.

    All the above being said…….

    I am far from happy with the article of Professor White.

    I know this is Christmas Day, but fundemental errors should not "get a pass" even on Christmas Day.

    I fully accept that the words "gold standard" have been used to mean all sorts of (contradictory) things, that is why they should not be used (other than to say "I will not use the term gold standard because….") as to use the term confuses matters.

    However, if we are talking of gold-as-money (or silver-as-money or whatever) then there is only one concept that makes sense.

    The government (or whoever is issuing the money) must look to see how much of the commodity it actually has.

    If it wishes to issue notes (rather than coins) it must divide the commodity (by weight and purity) by the number of notes it wishes to issue.

    If this means that a "Dollar" (if government insists on using special names for money – which is actually a source of great confusion and error) is worth (say) 0.1 (or 0.01 or whatever) of a gram (or gramme) of gold,then SO BE IT.

    There is no question of the government "buying in gold", still less of what Professor White seems to be suggesing.

    L. White seems to be suggesting that the government PRETEND it has gold it simply does not have – claiming a totally FALSE value for its "Dollars".

    This is not gold-as-money, this is simply a vast FRAUD.

    Professor White's suggestion should, therefore, be rejected – as it does not even start to deal with the basic issues.

    These things being (essentially) two.

    Firstly that "Dollars" (and Pounds and …..) do not represent a certain weight of any commodity (they are "fiat" – acts of government force and fear, via tax law and legal tender laws). Declaring that a "Dollar" does represent a certain weight of a commodity (for example gold) is ABSURD unless the issuer ACTUALLY HAS THAT AMOUNT OF THE COMMODITY. We would simply be back to pre 1971 days when government pretended that a Dollar was worth a 35th of an ounce of gold – when it simply did not have that ammount of gold (and did not have it even when President Roosevelt made this false claim in the 1930s – OR during the "gold standard" period of the 1920s).

    The second point is credit money expansion.

    Led by Ben Strong of the New York Federal Reserve the commercial banks produced a credit bubble in the late 1920s that was about ten times the size of the actual amount of money in existance – such a vast credit bubble could only lead to a great CRASH (a bust for the boom), claiming that the Federal Reserve acted wrongly during or after the bust (as establishment economists do) is a classic example of MISSING THE POINT (the point being that the CREATION of the credit bubble was the problem).

    How does PRETENDING that a "Dollar" represents a certain amount of gold prevent the creation of such a credit/money bubble? Either in the "gold standard" days of the 1920s – or the credit money bubble today?

    It does not. Such a pretence achieves nothing.

    It is IRELEVANT to the real matters of concern, indeed it is DIVERSION from actually doing something to deal with the real problems.

    As such Professor White's suggestion should be (as stated above) rejected.

    • Larry White

      You don't seem to notice that I would like government completely out of the money-issuing business. The proposal is for the government to swap its gold to the banks for their reserve balances on the Federal Reserve's books, and then stand aside.

      I have elsewhere explained why fractional-reserve banking by voluntary contract is not "absurd."

      • As long as government (at every level) commands nearly half of GDP and pays for it with notes promising gold and commands taxpayers to collect a similar volume of notes promising gold and sells entitlement to a huge volume of notes promising gold collected this way to nominal "investors", government is not out of the money-issuing business.

        If the government swaps its gold to Federal Reserve member banks and then proceeds to command half of GDP by commanding taxpayers to provide a similar volume of notes promising silver and so on, the banks' new stock of gold will be little use to them, because people will patronize banks issuing notes promising silver instead.

        Floccina asks the right question above. Why not free banking without transferring any gold to Fed members or converting Treasury obligations into obligations to pay in gold? Instead, the Fed continues to issue its fiat currency, but the state lifts restrictions on competing currencies. It accepts any reasonably common currency in payment of taxes (a percentage of earnings or sales in the earner's/seller's currency of choice), and it pays its bills in any currency the seller demands. Holders of Treasury securities continue to receive FRNs. If holders of Treasury securities suffer greater losses to inflation, I suppose that's a good thing.

        This approach might seem like an accounting nightmare, and it might have been an accounting nightmare a few decades ago, but it really isn't anymore. Existing information technology can easily handle it. The currency exchanges will be largely invisible. You only need to see current prices in your currency of choice.

        We can trust the state to encourage a gradual transition to other currencies by devaluing FRNs, but we need not favor gold in the process.

    • How does PRETENDING that a "Dollar" represents a certain amount of gold prevent the creation of such a credit/money bubble?

      A dollar does not represent a certain amount of gold under a gold standard. It represents the market value of a certain amount of gold. Anything can have this market value, not only the gold, and the market value of gold can change even if the number signifying this value does not.

      A gold banker can overextend credit by issuing too many promissory notes for gold against collateral (including the labor of borrowers) ultimately worth less than the gold promised. In this scenario, the banker's notes lose value. If all bankers systematically do the same thing, the losses are more widespread but still not universal, because some people hold few bank notes.

      If you want always to avoid these losses, you may always buy gold or any other durable commodity and bury it in your back yard or secure it otherwise; however, extending credit, though always risky, can be a profitable business. If you choose not to play the game, you cannot win it.

      Of course, gold buried in your back yard can also lose market value. If you want the government somehow to prevent this loss, I don't share your preference. If you want to compel everyone always to assign the same numeric value to your store of gold when pricing other goods, I also don't share your preference, but I have less of a problem with this compulsion as long as people may freely change their prices.

  • bmac6446

    The first nation that pegs it's currency to gold wins.