Who's Afraid Of The Gold Standard?

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A reader writes:

In your post about Megan McCardle's criticisms of Paul, you quoted the following:

"[Ron Paul] also has a number of beliefs that are, not to put too fine a point on it, utterly insane.  The gold standard is one..."

For the record, I have no idea about McCardle's views on the Iraq War and no reason to think she is being disingenuous in her criticisms of Paul's economic policies (unlike, for example, the truly odious David Frum).  But this statement, unfortunately, perpetuates one of the most common myths floating around about Ron Paul in the blogosphere, namely that he supports the immediate restoration of a strict gold standard for U. S. currency.  While Paul would ultimately like to see the dollar pegged to gold again, he does not advocate doing this precipitously. What he does support doing right now is legalizing private currencies backed by gold and silver.

Legalizing private commodity-backed currencies would give individuals the right to guard themselves against the inflationary tendencies of the greenback, without the various legal obstacles imposed by the current system. Paul's hope is that over time enough people will voluntarily to switch to gold-backed currencies as to make the final transition back to a real gold standard for the dollar relatively  painless.  His views on this subject are succinctly outlined in his essay "The Political and Economic Agenda for a Real Gold Standard" in the 1985 book "The Gold Standard: An Austrian Perspective," edited by Lew Rockwell.  Furthermore, as Peter Boettke explains in recent posts on his blog, these views are not merely the eccentric ramblings of a deluded old man, but similar to the opinions on monetary policy held by a number of distinguished economists, such as the Nobel Laureate Friedrich von Hayek.

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