[Dave Birch] Now that I’ve taken to riding my new government-subsidised bicycle to work, I’ve got more time to listen to podcasts (through one earphone only, for safety reasons) and I’ve been getting through a fair few recently. One that blog readers might enjoy is the podcast of a presentation by Lawrence White at the Foundation for Economic Education
on the Gold Standard, which includes some speculation on how the United States might return to a Gold Standard. This is fascinating stuff for anyone who is genuinely interested in the way that money works, and how information and communication technologies might cause disruptive change in the future. Lawrence
is the F. A. Hayek Professor of Economic History at the University of Missouri–St. Louis and an adjunct scholar of the Cato Institute. He is the author of two of my favourite books, Competition and Currency
and Free Banking in Britain
, which I have open on the desk in front of me as I’m researching the “Scottish experiment” in monetary competition for a paper that I’m writing.
What I was wondering, while listening to the podcast, was whether gold would make the best commodity for the purpose of a monetary standard going forward. In the past, when people discovered new gold fields, that had a slightly inflationary impact. So when the California gold fields were discovered in 1849, they caused inflation of around 1-2% per annum for the next decade. That seems low by modern standards but was almost shocking at the time. But suppose someone discovers an asteroid full of gold in the future? That would cause a problem. Look at the historical case study of the devastating impact of the discovery of South American silver mines on the economy and economic development of Spain: The inflow of new silver simply led to inflation. Lawrence says in the podcast that he’s using “gold standard” as a shorthand, but other commodities would do just as well. Any suggestions?
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]