Is the Gold Standard a ‘Crazy’ Idea?

Larry White says “no.”

UPDATE: Tyler Cowen agrees that the gold standard isn’t a ‘crazy’ idea, but nevertheless rejects a return to commodity-backed currency. Meanwhile, a commenter on the post at MR writes:

The purchasing power of gold has varied over a factor of ten since the 70s. Hardly a standard of value.

This is a very misleading statement. Since the 1970s, gold has been de-monetized. As Larry White explains, under the gold standard, the demand for gold is largely transactions-based and therefore the fluctuations in its purchasing power remain quite stable. When gold is de-monetized, however, its purchasing power tends to fluctuate a great deal.

UPDATE II: Larry White responds to Tyler Cowen.

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