Strong opinions, weakly held

Ron Paul and the gold standard

Much time has been spent debating the merits of Ron Paul’s desire to eliminate the Federal Reserve and return the United States to the gold standard from an economic perspective. What people don’t seem to get is that Paul’s argument isn’t based on economics, but rather on his desire to take power away from the federal government. He doesn’t trust the federal government to manage the money supply (or do anything else, really), and so he opposes the Federal Reserve. There’s not really any more to it than that.


  1. While I definitely agree that Paul wants to scale the federal government back to stay within their original charter, including removing the role of managing the money supply, his position on gold does seem to be based primarily on economics. The Austrian School believes in the gold standard.

    Of course, economics and government are intrinsically related so maybe the whole argument is a bit off. I tend to believe that Paul’s primary motivation is actually the economy and his positions on the federal government are based on the economic changes those positions would (theoretically) create:

    The Austrian’s beliefs on the gold standard set up the argument that government is the cause of the business cycle (the economy’s recurring pattern of recession and recovery). When the government expands the money supply — usually by easing credit restrictions and lending rates — this artificially increases investment. Much of this is malinvestment, on projects that wouldn’t have been started otherwise. When the malinvestment reaches sufficient proportions, the result is a recession. Should the government do anything to ease the pain? Austrians say no. Weak firms must be allowed to go bankrupt, unjustified jobs must be eliminated, artificially high wages must fall. Only then can the economy start anew on a healthier course of growth.

    By the way, my regular diet of mostly technological related research has been largely replaced with this stuff over the past couple of months. Paul looks to be clearly out of the race at this point but he’s exposed a whole world of thinking that I never knew existed.

  2. http://en.wikipedia.org/wiki/List_of_recessions

    I can’t find a better source, but there were still plenty of recessions during the 1800’s. In his book, Greenspan plainly states his desire to return to the 1800s style of government, so it’s not just Ron Paul. Make no mistake, things were not all rosy just because of a gold standard, though. From my viewpoint, the desire to return to the gold standard is based on the idealogical, not the factual.

  3. The Austrian school was discredited generations ago. Maybe you didn’t know about this kind of thinking because it’s been long dead, except for a few of those suspiciously well-funded think tanks that all pseudoscience seems to attract.

  4. Paul’s doomed, no chance whatsoever, but I’m glad he’s in the race just because of his ability to show that the other candidates the republicans are throwing out are more or less full of shit, economics-wise. He comes off as the only one that has actually given the economy thought at all. Whether or not you agree with him. The others just parrot dead reaganisms.

  5. The important thing to me is the fact that this change, which Paul’s supporters so strongly advocate, would have second- and third-order consequences THAT THEY WOULD NOT LIKE (to put it mildly) and that they evidently cannot think through.

  6. Yeah, considering that at the current price of gold, there’s about $4T dollars existing in the world total, I can see one big effing second order effect without even thinking at all. You have a choice, eithermodify wat a dollar is worth, or modify what gold is worth. Guess which one the world will agree on.

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