Another day, another weird idea from Newt Gingrich. Today’s special: The U.S. should consider a return to the gold standard. Gingrich, speaking at a forum in South Carolina (a place that really seems to bring out the crazy in people), admonished the Federal Reserve and declared: “Hard money is a discipline. It means you can’t inflate away your difficulties.” Would a return to the gold standard stop inflation?
Economists, who overwhelmingly oppose returning to the gold standard, say no. Harvard’s Richard Cooper, in a 1982 paper, noted that much goldbuggery comes from “those who still attach a monetary significance to gold and do not fully comprehend that, ultimately, money is a social convention.” Cooper’s argument addresses Gingrich’s contention, noting that “interest in reviving gold lies primarily in a desire to eliminate inflation.” But on that point, Cooper writes, “the historical gold standard offers little comfort.” In fact, price instability was common in the heyday of the gold standard. Attempts to stop inflation by fixing the dollar price of gold fail because “the relative price between gold and other commodities […] is variable over time.” Of course, half-baked nonsense is hardly uncommon with Newt—when it comes to ideas, he’s the anti-Midas.