The Agenda

A Non-Cranky Defense of the Gold Standard

In today’s New York Times, Ross Douthat takes on Rand Paul and paleoconservatism on the Civil Rights Act and other issues. “Like many groups that find themselves in intellectually uncharted territory,” writes Douthat, “they have trouble distinguishing between ideas that deserve a wider hearing and ideas that are crankish or worse. (Hence Ron Paul’s obsession with the gold standard and his son’s weakness for conspiracy theories.)”

Douthat is being a bit unfair here. Paleoconservatism isn’t intellectually uncharted territory; whatever its faults or merits, its acolytes built the philosophical foundations of Cold War conservatism. But I don’t want to digress into a pedantic discussion of the intellectual foundations of paleoconservatism. Rather, I want to take on the idea that advocacy of the gold standard is a crankish obsession, one that is intellectually (and perhaps morally) on par with opposing the Civil Rights Act.

If the gold standard is merely a crankish obsession, then the ranks of obsessive cranks include not only Ron Paul but also Friedrich Hayek, Robert Mundell, Jude Wanniski, Robert Bartley, Jack Kemp, and Steve Forbes. That is to say, most of the leading exponents of supply-side economics. (Note that this roll call includes two Nobel laureates.) Indeed, sound-money policies have been at the core of conservative monetary policy from the beginning. It wasn’t too long ago that opponents of the gold standard, like William Jennings Bryan, were thought of as the cranky ones.

It is true that the gold standard is an unfashionable idea in Washington, but it is a mainstream one within the financial community. This is unsurprising on both fronts. The financial community is the consumer of government debt, and is therefore intensely attuned to the relationship of monetary policy to the value (i.e., default risk) of that debt. Investors see over and over again the pattern by which governments depart from hard-money policies (such as the gold standard) in order to engage in deficit spending, and then devalue their currencies in order to reduce the value of the debts they then incur. It is a story that all too frequently ends in credit default and economic collapse. The financial community sees no reason why the United States should be immune from the laws of economics.

On the other hand, the political class is attuned to the value of increasing government debt; that is, of building and rewarding political constituencies with high state spending and low taxation. So it is natural that a return to the gold standard is considered eccentric in Washington.

This is not to say that there aren’t thoughtful, disinterested critiques of the gold standard; there are (Milton Friedman comes to mind). But if we continue on our present fiscal course, it is only a matter of time before the bond vigilantes now ravaging Greece make their way across the Atlantic. When that happens (if not before), countries like China and Russia will take concrete steps to dissociate themselves from the U.S. dollar. Given that few other currencies are ready to take the dollar’s place, don’t be surprised if their next move is a transition back to a metals-based monetary system.

Avik Roy — Avik Roy is the President of the Foundation for Research on Equal Opportunity (, a non-partisan, non-profit think tank.

Most Popular

Politics & Policy

Did Flynn Lie?

At the outset, let’s get two things straight: First, there is something deeply disturbing about the Obama administration’s decision to open a counterintelligence investigation on retired lieutenant general Michael Flynn while he was working on the Trump campaign — and, ultimately, about the Justice ... Read More
Law & the Courts

Where Is the Flynn 302?

Better late than never (I hope), my weekend column has posted on the website. It deals with the question whether General Michael Flynn actually lied to the FBI agents — including the now infamous Peter Strzok — when they interviewed him in the White House on his third day on the job as national security ... Read More
Politics & Policy

Who’s in Charge Here?

In the run-up to the 2016 presidential election, Donald Trump was asked on many occasions whether he would “accept the results” of the election if he were to lose. Democrats and their media allies demanded that he make a solemn vow to “accept the results.” It was never entirely clear what anybody thought ... Read More