There’s Still a Case for Gold

November 10, 2012 in Gold, Precious Metals

By: Ron Paul · 

Thirty years after its first publication in 1982, The Case for Gold remains remarkably timely. The Case for Gold is the minority report of the U.S. Gold Commission and lays out a thorough and comprehensive defense of sound money. Today, The Case for Gold remains a timeless piece of scholarship, offering successive generations both a prescient warning and a path to sound currency and a stable U.S. dollar.

When Lewis Lehrman and I submitted this minority report, it had been 10 years since Richard Nixon, by executive fiat, ended the last vestiges of the gold standard. Those intervening 10 years should have shown us again what all of human history teaches: When a nation adopts paper (which can be printed without limit) as the basis of its monetary system, the results cannot be good for the people. The elites and the government can fare pretty well for a time, but the people suffer in the end. Paper money experiments, usually adopted as temporary expedients, do not end well for anyone.

The 1970s was a decade of economic malaise, resulting from the U.S. government’s decades-long loose monetary policy. Outflows of gold throughout the 1960s led to President Nixon’s decision to close the gold window in 1971, severing the final link between the dollar and gold. The next several years witnessed the emergence of stagflation, as both inflation rates and unemployment rates rose in unison. Inflation rates soared into double digits by the end of the decade, while unemployment rates continued to rise, peaking at nearly 11% in the early 1980s. It was against this economic backdrop that the call came to establish the U.S. Gold Commission.

In 1980, Sen. Jesse Helms introduced an amendment to a Senate bill, and I introduced a similar amendment in the House, calling for the establishment of a commission to examine the use of gold in the monetary system. Although the legislation establishing the commission was signed into law by President Carter, his loss in the 1980 presidential election meant that President Reagan — a public supporter of the gold standard — would be responsible for appointing many members of the commission. While President Reagan was sympathetic to the gold standard, he did nothing to restrain the anti-gold members of his administration. As a result, the Gold Commission was packed with establishment supporters of fiat money and the Fed. Thus, the deck was stacked against the pro-gold forces from the outset.

Despite the commission’s ultimate endorsement of the fiat paper money system, the commission’s work resulted in positive developments: the eventual adoption of legislation to authorize the minting of gold coins by the United States Mint and the publication of the commission’s minority report as The Case for Gold. And the intellectual case for gold put forth in the commission’s minority report provided the underpinnings for the continued drive toward a restoration of sound money.

Most of the historical research in The Case for Gold was undertaken by the eminent Austrian School economist Murray Rothbard. Rothbard was the leading scholar in America’s monetary history. His work makes it is only too clear that government intervention into monetary affairs is at the root of all economic crises. The Case for Gold explains the numerous interventions, the disastrous effects of those interventions, and the steps needed to free the markets in order for gold to return to its rightful place as the ultimate commodity money.

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