Should We Open the Gold Window

The New American website published an interesting story this week. Charles Scaliger penned a piece in which he concluded that “Restoring a genuine gold standard would not solve all of our financial problems. But it would be a gargantuan first step in the right direction.”

He also pointed out that this week, which had seen such high market turbulence in the wake of the S&P downgrade, is the 40th anniversary of Nixon’s removal of the United States from the last vestiges of the gold standard.

Printing more money whenever it struck the government as a good idea has resulted in 40 years of financial instability, Scaliger points out. I can’t argue with that.

He points to a previous article in which Forbes magazine called for a return to the gold standard.

On the surface, this seems as likely as wishing on a star, but a few points are brought to our attention:

First, Nixon did not abolish the gold standard as it had existed from the founding of the country until the 1930s; he abolished the gold exchange standard which had existed since the end of the Second World War. This system did not allow ordinary American citizens to own gold coins, bullion, or certificates (a freedom that was not restored until 1974 by President Ford), or to redeem Federal Reserve notes in gold. That privilege was reserved for foreign holders of U.S. dollars only. This elitist “gold standard” was similar to that imposed on the peoples of Europe after World War I.

Scaliger points out that what he suggests would “require reforming several centuries’ worth of banking laws.”

The alternative? We’re living it.