Hello Yellow Brick Road
by digby
Paul Krugman notes that the GOP platform’s predictable demand to a return to the gold standard is nothing compared to Paul Ryan’s demand that we return to a time before paper money. This belief stems from his devotion to passages of Atlas Shrugged, but one can go directly to the guru’s mouth to find a straightforward explanation:
Money is the tool of men who have reached a high level of productivity and a long-range control over their lives. Money is not merely a tool of exchange: much more importantly, it is a tool of saving, which permits delayed consumption and buys time for future production. To fulfill this requirement, money has to be some material commodity which is imperishable, rare, homogeneous, easily stored, not subject to wide fluctuations of value, and always in demand among those you trade with.
This leads you to the decision to use gold as money. Gold money is a tangible value in itself and a token of wealth actually produced. When you accept a gold coin in payment for your goods, you actually deliver the goods to the buyer; the transaction is as safe as simple barter. When you store your savings in the form of gold coins, they represent the goods which you have actually produced and which have gone to buy time for other producers, who will keep the productive process going, so that you’ll be able to trade your coins for goods any time you wish. Ayn Rand –“Egalitarianism and Inflation,” Philosophy: Who Needs It, 127
Also too, the Oracle:
Gold and economic freedom are inseparable, . . . the gold standard is an instrument of laissez-faire and . . . each implies and requires the other.
What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. Where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible.
More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable . . . .
The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron . . . .
Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold . . . .
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
That’s from an essay by uncle Alan Greenspan in Rand’s book Capitalism: The Unknown Ideal. That’s the guy, you’ll recall who was in charge of America’s monetary policy during the time of the greatest growth in income inequality since the gilded age. Somehow he made it work.
For a thoroughly enjoyable column on the nuttery of gold buggery, this piece by Krugman that Mark Thoma drew from the old Slate archives is not to be missed. Like so much else in rightwing economics, it’s another example of magical thinking.
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