Nathan Lewis is a contributor to Forbes. A contributor is a non-salaried writer. Contributors fill up the Forbes site to generate ad revenues. The policy favors quantity over quality.
Lewis attacks Austrian School economists as kooks. Why? Because they do not trust the federal government to set up a gold standard that does not rely on gold coins and a government guarantee to exchange the government’s fiat money — which he favors — for gold at a legally fixed price.
Mr. Lewis does not think a gold standard needs to be based on actual coins in circulation. He has recently written an article on the gold standard. It is not the gold standard of the pre-World War I era, when anyone could own gold coins, and they were commonly used in exchange. A person could exchange government-issued paper money for gold coins at a government-guaranteed fixed price of gold. No, Mr. Lewis means another gold standard, one run by the federal government. It has nothing to do with the right of holders of fiat money to force the hand of the government by cashing in fiat money for hold at a fixed price. Why, that would constitute a bank run on the government. No, no, no: he does not want something like that. He has a work for such a view: kooky.
The world is ready to consider a new gold standard, he says. Times have changed. The kooks have been left behind.
Also, the gold standard advocates of the 1980s and 1990s were a pretty kooky bunch, pounding the table for all kinds of “100% pure gold standard system” notions that were honestly rather laughable, and unusable in practice. What they called a “gold standard” did not resemble any actual gold standard system in use in the previous two centuries. Among a more sober and sophisticated crowd, these people got the attention they deserved, namely: zero.
You know who these kooks were, of course: Austrian School economists — followers of that fellow Mises. They were not sober. They were not sophisticated.
Also, gold standard advocates these days seem to have outgrown some of their more imaginative (read: stupid) notions of past decades. I think more progress needs to be made here, but most proposals I see today are actually quite sensible at their core.
And who might these not-stupid people be? For one, Alan Greenspan. Not the 1966 Alan Greenspan, who came out for a kooky gold coin standard. No, the new, improved Alan Greenspan, who gave one brief 2011 Fox Business interview that was not widely quoted by the mainstream financial media, but which did get quoted by a ZeroHedge writer.
“We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity… There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.”
Greenspan did not defend the idea of the gold standard when he controlled the majority of the Federal Reserve Board for 18 years. Then he blew bubbles. Now we have the powerless Greenspan, whose word carries no weight — kind of like a gold standard without sanctions.
Lewis was a pro-FED guy before.
As a member of the “keep the Fed” camp in prior years, it seems to me now that we will most likely come to that point, in not too many years, where replacing the Fed will be the best and even the easiest path.
He then quotes an unnamed kook: “End the Fed.”
You can read it here.
REPLACE THE FED
If Congress ends the FED, what should replace it? If not free banking, as recommended by Mises and those Austrian School kooks, then what? The gold standard.
But what kind of gold standard? This kind.
The easiest, simplest, fully-operational form of a gold standard system could be implemented in ten minutes. It doesn’t cost anything, and doesn’t require any gold bullion.
No gold bullion? That sounds unique.
The better classical economists have always known that gold bullion itself is not really necessary for a gold standard system. Gold is the “standard,” in other words, the “standard of value.” It is just something you compare against.
(For the rest of my article, click the link.)