Why Gold?

by James E. Miller

“I noticed a contradiction,” writes an anonymous blogger:

The Austrian School advocates against price fixing and economic planning, and the Austrian School advocates a gold standard, which can be seen as a way of fixing the rate of change of the size of the money supply through economic planning.

While it’s true that many Austrian economists (Mises, Rothbard, Hayek, etc.) write in reference to gold as money and use such definitions in their thought constructs, the context of their writing must first be understood. The majority of the dominant Austrian economic literature today was composed at a time when gold was still considered money in some aspects of the global economy. It was only after 1971 — when Richard Nixon took the United States off the gold standard (not a true gold standard, but bear with me) completely, thus shattering the Bretton Woods agreement — that the transformation of the dollar into a full fiat currency backed only by the “full faith and credit of the United States” was complete. The “full faith and credit” of course refers to the government’s ability to pillage its citizens of their earned wealth.

So many times when Mises or Rothbard refer to money as gold, it’s because an international gold standard, albeit an incredibly flawed one, was still in operation at the time of most of their writings.

As far as Austrians advocating a return to a gold standard goes, this is an often misinterpreted position. Austrians recognize the efficiencies and wealth-generating ability of the uninhibited market. They are wary of government intervention, which interferes in the process of billions of remunerated individual transactions en masse that encompasses a market economy. Austrians merely wish to extend their laissez-faire views to the creation and sale of a specific commodity: money.

Continue reading at mises.org…

image: mises.org

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