I don’t believe specifically in the gold standard, but I like the idea of a “basket” of commodities, but I think the formula should be a public one.
Actually, I assume that this is what they do, except that they don’t publicize what the criteria are. We had a pretty stable dollar from Reagan until the war started, with a very modest inflation during that time.
Say what you like about the Austrians, however, Mises predicted the Great Depression and virtually every boom and bust since then has been fully explained and expected by them. In addition, he predicted the downfall of fractional reserve banking, which we are now experiencing. His explanation of the creation of bubbles has never been bested in over 100 years. The fact is that paper money, backed up by nothing, is the bane of man’s existence and the cause of civilizations and empires collapsing.
Only a gold standard, or perhaps bi-metallic standard can prevent these booms and busts and hyper-inflation that we are about to encounter in this country. A fixed money supply, the gold supply expands about 1.5% per year, can prevent politicians from printing money and giving it out to their favorite causes. There is no other way.
From the passing of the Federal Reserve Act in 1913 to now, our money is worth perhaps 1% of what it was in 1913. The times where we encountered major inflations prior to 1913 were the revolutionary war—not worth a continental, the War of 1812—off the gold standard, the Civil War—greenbacks galore. During those prior times, when we returned to the gold standard, an amazing thing happened, no inflation and a return to the prior price level.
From 1790 to 1913, do you know what the average annual inflation rate was, .12 percent per year. This is even factoring in the inflationary war periods. Because as can be seen, inflation will only go so far, then it will be followed by deflationary depressions, 1873, 1893, 1934.
Its all in the history books that our public schools seem to have misplaced. Economic history is a repeat of the same mistakes over and over again. Its like the minimum wage, if raising it to $10 is good then raising it to $50 is even better, right? Well if printing a trillion is so good, lets print 10 trillion, that will make everyone a millionaire. Ah if it were only so easy.