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A Golden Moment?

It’s not only fiscal policy that lacks a rudder.

12:55 PM, Jul 24, 2011 • By WILLIAM KRISTOL
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Judy Shelton makes the case in the new issue of THE WEEKLY STANDARD for the “Gold Standard or Bust.” Sound finances, she points out, require sound money, and sound money, it turns out, seems to require a dollar as good as gold—i.e., a return to a gold standard. As she puts it, “monetary policy needs some discipline to prevent the dollar from being the default mechanism for enabling government mismanagement. Gold convertibility would signal that we intend to maintain the integrity of our currency.”


And in the business section of Sunday’s New York Times, Jeff Sommer has a respectful discussion of gold, citing TWS contributors Jeffrey Bell and Lewis Lehrman. Sommer captures the gist of Lehrman’s argument—that “a gold standard would require the government to balance its budget and its current account,” and that “it would have made it impossible to accumulate the enormous private-sector debt load that led to the financial crisis of 2007.” He quotes Lehrman: “The debts in the American banking system that were amassed simply would not have been feasible if you had direct convertibility of currency into gold.”

So when we get through the debt ceiling negotiations, and as Republicans continue to focus on the big changes that need to happen in fiscal and tax policy, some of them might want to turn their attention to the third leg of the economic stool—monetary policy. And there the case for gold—a case that was obscured for a while by the performance of Paul Volcker and (for a time) Alan Greenspan at the Fed—is increasingly compelling, both substantively and politically.

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