The Republican Party platform includes an endorsement of a commission to study the return of America to the gold standard, a gift to Ron Paul supporters who have steadfastly supported the 19th century-era idea.
Drafts of the party platform, which it will adopt at a convention in Tampa Bay, Florida, next week, call for an audit of Federal Reserve monetary policy and a commission to look at restoring the link between the dollar and gold.
The move shows how five years of easy monetary policy – and the efforts of libertarian congressman Ron Paul – have made the once-fringe idea of returning to gold-as-money a legitimate part of Republican debate.
Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the platform committee, said the issues were not adopted merely to placate Mr Paul and the delegates that he picked up during his campaign for the party’s nomination.
“These were adopted because they are things that Republicans agree on,” Ms Blackburn told the Financial Times. “The House recently passed a bill on this, and this is something that we think needs to be done.”
I think the fact that House Republicans recently passed a bill on a gold commission reflects the influence of Paul in Congress rather than independent thought on the part of the GOP. But let’s just step back and understand how nutty it is to even consider returning to the gold standard. I assume that Mitt Romney and his team know this – that’s why they allowed only the adoption of a “study commission,” which is the fastest way to sink an idea in Washington. But just for the record, goldbuggery borders on the insane, as Paul Krugman explains in a 1996 piece for Slate:
The legend of King Midas has been generally misunderstood. Most people think the curse that turned everything the old miser touched into gold, leaving him unable to eat or drink, was a lesson in the perils of avarice. But Midas’ true sin was his failure to understand monetary economics. What the gods were really telling him is that gold is just a metal. If it sometimes seems to be more, that is only because society has found it convenient to use gold as a medium of exchange–a bridge between other, truly desirable, objects. There are other possible mediums of exchange, and it is silly to imagine that this pretty, but only moderately useful, substance has some irreplaceable significance [...]
First, a gold standard would have all the disadvantages of any system of rigidly fixed exchange rates–and even economists who are enthusiastic about a common European currency generally think that fixing the European currency to the dollar or yen would be going too far. Second, and crucially, gold is not a stable standard when measured in terms of other goods and services. On the contrary, it is a commodity whose price is constantly buffeted by shifts in supply and demand that have nothing to do with the needs of the world economy–by changes, for example, in dentistry.
The United States abandoned its policy of stabilizing gold prices back in 1971. Since then the price of gold has increased roughly tenfold, while consumer prices have increased about 250 percent. If we had tried to keep the price of gold from rising, this would have required a massive decline in the prices of practically everything else–deflation on a scale not seen since the Depression. This doesn’t sound like a particularly good idea.
Krugman follows up on this today by noting that Paul Ryan has described a fondness for a speech in Ayn Rand’s Atlas Shrugged where the character calls for return not just to a gold standard, but to a return to gold coins and an abolition of paper money.
Party platforms don’t mean much of anything these days, and Ryan’s support of some gibberish in a bad novelist’s scribblings doesn’t amount to a whole lot either. But if nothing else, the whole episode shows how retrograde hard-money policies are gaining currency (pardon the pun) on the right.