Wednesday, August 29, 2012

Richard on Gold

The inclusion of a plank supporting a commission to study a return to the gold standard in the Republican platform has prompted a number of economists to explain (again) why it is a bad idea.

In an LA Times op-ed, my Wesleyan colleague Richard Grossman writes:
History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.
See also Paul Krugman.  My version of the case against gold is in this earlier post.


Anonymous said...

Alan Greenspan wrote a very strong PRO gold standard article in 1966. It's available on the internet. As far as I know he has NOT repudiated it! Certainly one of the most fascinating / interesting / amazing facts in the realm of contemporary (more or less) economics!

Bill C said...

I wonder if it came up during his confirmation hearings (at some point I'll have to look it up...). It does scare me a little that someone who'd espoused such nutty views and sat at Ayn Rand's feet ended up in such a powerful position.