Gold Standard

More and more journalists and economists are calling for a return to "sound money." Joseph Salerno's new book provides a rigorous examination of what sound money really means.

The principle of sound money consists in affirming the market's ability to choose and maintain money (and the enormous benefits this has provided to society) and also in opposing any government meddling in money.

Gold in the money survived all the way to Nixon, and it was he who finally drove the stake in once and for all. That was supposed to be the end of it, and the beginning of the glorious new age of paper prosperity.

A pure gold standard is not conducive to business cycles. Contrary to mainstream economists, it is the attempts of the central banks to bring about price stability and full employment that set in motion the menace of boom-bust cycles.

The economist should not allow his readers to accept the current myth that inflation is a scourge that governments try, with varying success, to keep in check. This myth is one of the consequences of economists generally failing to make explicit their assumptions.

Central bankers cannot be trusted with the printing press, especially when there is no formal check on their inflationary policies. It is no coincidence that gold is hitting such heights as investors the world over hunker down for what may very well be a collapse of the dollar system.

Recorded at the Ludwig von Mises Institute; Auburn, Alabama; 8 October 2010.

In the last week there have been many interesting developments involving gold. The price of the yellow metal set a new record, breaking through the $1,300 barrier. A German firm is preparing to install gold-vending machines in the United States. There's more.

Thomas Mun set forth what would become the standard mercantilist line. He pointed out that there was nothing particularly evil about the East India Company trade. The company imported valuable drugs, spices, dyes, and cloth from the Indies, and it re-exported most of these products to other countries.

The Memoranum did not only denounce debasement and call for a high-valued currency, but it also enunciated "Gresham's law" that the cause of a shortage of gold coin in England was the legal undervaluation of gold.