20 March 2008

Ron Paul and Gold Standard

American presidential campaign is in full swing and you are probably asking who I am supporting. Well, I am a centrist with rightwing inclinations, but I won’t tell you now. I will make my endorsement later.

I would like to point your attention to a very interesting phenomena: Ron Paul. Not that I am supporting the person. Just by contrast: his ideas of the return to gold standard is what astounds me, a person with New Keynesian inclinations (which is my inclination, and NOT of all blog ppl).

Just watch the video (a bit old, but still ok for the topic):

And this one as well:

There are so many arguments against gold standard. Here I will only mention government's inability to smooth economic fluctuations, rate of inflation dependent not on government policy but on mining gold, adjustment through interest rates and economic slowdown and not through exchange rates. You can easily find more on EconLib or Brad deLong website.

The phenomenon is, therefore, trully astounding and not easy to explain. It seems to me that it stems from the complexity of economics and people's inclination towards simple solutions.

But are these the only reasons, or maybe there is more to it that meets the eye?


Mr. Hofmeijer said...

That guy in the second video is incredibly silly! He believes in conspiracy theories! He called the great depression a scam! An intentional scam. Absurd.

And going back to the gold standard is just as absurd!

Anonymous said...

Um, the reason why people are in favor of the gold standard is because monetary policy is consistently manipulated to favor financial interests. In the current situation both the succession of asset bubbles as well as the war on Iraq are fueled by inflationary monetary policy. The goal is to constrain the government's ability to inflate the currency at will. The gold standard is merely a tool in that respect.

Anonymous said...

the abstractness of the systems is definately an issue - none of this was explained in high school. i suspect this is one reason that people have an easier time investing in assets like houses... and beanie babies...

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