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Hayekian Musings of a Gold-Standard Pessimist

I reckon myself a fan of the classical (pre-WWI) gold standard, considering it to have been the best monetary arrangement ever, and a far better one than the various supposedly scientific alternatives seen since. I also bristle at misinformed criticisms of that standard, including the very popular claim that it, rather than the machinations of central bankers bent on severing the normal connection between gold flows and money supply adjustments, was responsible for the Great Depression.

I'm convinced, furthermore, that there is a strong positive relation between the smugness with which an economists dismisses the gold standard (and all those who have anything nice to say about it) and the likelihood that that economist knows nothing at all about the subject. Evidence of this happened to come across my desk just yesterday, when I found myself obliged to real a stack of papers about Bitcoin. Although they were all perfectly lousy, the one that earned pride of place for dishing-out the single most idiotic bit of disinformation did so by declaring, in the course of a brief (and entirely erroneous) review of the gold standard's shortcomings, that the former connection between the U.S. dollar and gold rested upon gold reserves held at Fort Knox! (The writer, by the way, is a chaired professor at a leading U.S. business school, who holds a Harvard Ph.D. in "business economics.")

But while I'm for barring no holds when it comes to defending the old gold standard against unthinking critics, and even some thinking ones, I've never been one to rest my hopes for monetary reform upon the prospect of its revival. I have a number of reasons for not doing so, including my fear that such a revival, if it could be accomplished at all, could prove extremely disruptive, as well as my belief that to be worth having a revived gold standard would have to be no less international in scope than the original, making gold a poor basis for any unilateral reform.

But my main reason consists of my belief that the legal foundations of the historical gold standard may themselves prove impossible to recover. The paper I wrote for this year's Cato Monetary Conference on "Law, Legislation, and the Gold Standard," spells out this last source of my doubts in some detail.

If anyone, having read the paper, thinks he or she can restore my hopes for gold, I am all ears.

Postscript: For some reason SSRN is being stubborn about letting people download my paper using the link supplied. If you find that that's so in your case, just google the paper title and my name, and the appropriate SSRN page with top the results list. You should be able to download the paper without trouble by clicking on that result.