Goldmember.
This morning I had to give a bit of an economics lesson to someone who is hugely in favor of the gold standard. He believes, as many “goldbugs” do, that if we stopped letting the Federal Reserve control our money, and just went back to gold, we’ll no longer have to worry about inflation: Gold will hold its value, and the government won’t be able to monkey with its value by printing up more of it.
“No,” I said; “instead you’ll have Bond villains who monkey with its value by hoarding it, or after a few years of hoarding it, flooding the market with it.”
He didn’t understand. (Hadn’t seen Goldfinger, or even Goldmember.) So I explained.
It strikes me as amusing how all these folks, who are scared to death of a one-world government and one-world currency, nonetheless are very fond of the gold standard. Somehow they don’t realize this turns gold into a de facto one-world currency. If they do, they assume, naively, that it can’t be controlled by any government; that gold has an inherent value which is beyond government control. Clearly they don’t know squat about commodities trading.
Gold isn’t money. It’s a commodity. It’s a raw material, which can be bought and sold by anyone who wants to buy and sell it. And if they want to manipulate how much of it there is in the world, they can. They can build a giant vault, hoard it, and drive up its value. Or they can open up their personal stockpiles (or run their gold mines overtime), and flood the market with it. Any major government can do this. Any wealthy individual can do this. The value of gold is at their mercy—and if the United States is on the gold standard, there’s not much we can do about it.
Imagine we went back to gold. When the United States buys a bunch of stuff from China, where would all our gold go? Right: China. How much gold would we have left? Not as much. What would happen to the value of the gold we have left? It’d go way up; we’d go through serious deflation. Previously a loaf of bread cost 50 cents in gold. Now, with that same 50 cents, you could buy two loaves. Nice, eh?—your gold goes further! But not nice for the baker: She’s making half the money, still has to pay her employees $2 an hour, can’t afford to, and has to fire people. They’re out of work. Good thing their gold goes further, but still.
And after everyone’s adjusted to the new value of gold, what happens when Israel buys a bunch of U.S. warplanes? Suddenly we’re flush with gold again. Serious inflation. Prices shoot up. People can’t pay bills. Landlords evict tenants. Employees beg for raises. More chaos.
Unstable currency means an unstable economy, and an unstable economy can’t be trusted and won’t grow. That’s why the Federal Reserve monitors the value of the dollar constantly, just to make sure the rate of inflation goes up slowly. Nowhere near as fast as the 1970s… and nowhere near as up-and-down as when we were on the gold standard, with boom following recession every decade.
Commodities brokers already make a decent profit by manipulating global gold prices. Drive it up, and get everyone to buy gold; drive it down, and get everyone to buy whatever alternative commodity you’re pitching. Libertarians will buy a bunch of gold one year, a bunch of silver the next, and every time they switch back and forth, brokers make money. It’s a perpetual money-making scheme. Now, imagine how wealthy they’d get if governments were playing this game. And whose money would the governments be playing it with? Right: Yours.
Hence, back when we were on the gold standard, there were a lot of laws about who could possess gold and who couldn’t. It was illegal for Americans to hoard gold, or import or export it. There were strict controls on it, ’cause the government didn’t want its value monkeyed with. If you think going on the gold standard means greater individual economic freedom, you’ve got another think coming.
But the biggest problem goldbugs have is they believe there’s such a thing as an absolute value—and they believe gold has it. But there is no such thing. Nothing has an absolute value. It’s relative. Always has been. Economists know this, but Ayn Rand was no economist, and blindly believed gold was the only thing of real worth in the world. Her disciples think so too—even the ones who buy and sell gold on the commodities market, and should know better.
America’s relatively stable currency has deluded them into believing such a thing is possible, but they don’t realize just how much work goes on behind the scenes to keep America’s currency stable. They’ve never had to live under the instability of gold, and don’t know history well enough to know what’d happen. And those who don’t know the past… well, if you don’t know the rest of that saying, you’ll probably fulfill it.