Republicans Are Wrong on Call for Gold Standard

Bruce Bartlett in the New York Times, Republicans Are Wrong on Call for Gold Standard.

"The Gold Commission issued its report in March 1982. It said that most members of the commission ‘believe that a return to the gold standard is not desirable.’ Of the commission members, only Mr. Lehrman and Mr. Paul dissented and recommended its re-establishment.

Even before that, however, the Reagan administration had signaled its negative position on any return to a gold standard in the Economic Report of the President, issued in February (starting on Page 69). The gist of its objection was that while a gold standard provided stable purchasing power over long periods of time, that was only because inflations were subsequently offset with debilitating deflations. As a consequence, there were greater economic instabilities, higher unemployment and longer recessions during the gold-standard era.

Economists today generally believe that the gold standard exacerbated the Great Depression. They note that those countries that went off it first in the 1930s were the first to recover. A survey of a panel of 41 prominent economists earlier this year by the University of Chicago business school found no support for a gold standard, including by those who had served in Republican administrations, including Edward P. Lazear of Stanford and Richard Schmalensee of the Massachusetts Institute of Technology."