The Financial Times is reporting that the Republican platform to be unveiled in Tampa next week calls for establishing a commission to examine whether the United States should go back on the gold standard. The theory behind this antiquarian fantasy, much loved by Ron Paul and his cult, is that by de-linking the dollar from the value of gold—a move begun by President Franklin Roosevelt in 1933 and completed by President Richard Nixon in 1971—America’s leaders have debased our currency and loosed the genies of inflation, since the Federal Reserve can print as many dollars as it likes.
It’s a curious time to call for a reversion to gold, but then virtually nothing in the Republican platform speaks to the America of today. For one thing, America hasn’t had a real bout of inflation since the 1970s, and in recent years, inflation has been nowhere to be found. Second, the dollar has never been stronger. The world’s investors have flocked to buy dollars in recent years. The interest payments they make on such purchases have fallen to naught, but they keep on buying because in a parlous world economy, the dollar is considered the safest investment of them all.
But according to the hard-currency hard cases, the dollar should be weak. Since the Wall Street crisis of 2008, the Fed has periodically flooded the economy with dollars. (Well, parts of the economy, particularly banks. For homeowners, not so much.) That should have brought us ruinous inflation, according to theories beloved not just by Ron Paul, but Paul Ryan as well. And forced to choose between their theories and mere actuality, they—and now the entire GOP—are going with the theories.
What reverting to the gold standard would do would be to make it impossible for the Fed to act in a Keynesian fashion during a downturn. Locked into the value of gold, it couldn’t lower interest rates to stimulate the economy. In fact, this is what happened repeatedly in every downturn before Keynes came along. Governments didn’t lower interest rates or boost the economy to take up the slack in the private sector, which is why recessions throughout the 19th and early 20th century were both frequent and severe. It’s why farmers wanted the United States to go off the gold standard in the late 1800s, because it made it very difficult for them to get the credit they needed for next year’s crop and new equipment. It’s why they created the populist movement, and why that movement’s champion, William Jennings Bryan, thundered in accepting the Democrats’ presidential nomination in 1896, “You shall not crucify mankind upon a cross of gold!”
Now, the crucifiers have returned. Reverting to the gold standard, denying climate change, failing to grasp reproductive physiology, suppressing minority voting—from what century, what geologic epoch, what flat-earth society do the Republicans gathering next week in Tampa emerge? They’re not (when it suits them) just constitutional originalists; they deny all gains in human knowledge since 1787. Or maybe 787. Or maybe 87. Good Lord.
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