Steve Forbes‘ latest column for Forbes magazine lauds a book that makes a case for returning to the gold standard.
The key to unlocking a great boom (along with a low-tax regime) is stable currencies. Without sound money we will be hurt by more dangerous and unnecessary crises à la 2008-2009 and subsequent limp recoveries, which are slowly eating away at the legitimacy of our liberal democracies. …
… Unstable currencies are like viruses in your computer–they corrupt those “bits” of information. Destructive bubbles result, such as the housing frenzy preceding the 2008-2009 crisis. In 2001, a barrel of oil cost little more than $20. Then the U.S. Treasury Department and the Federal Reserve deliberately began weakening the dollar in the mistaken belief that this would stimulate more exports and economic growth. Petroleum rocketed to more than $100 a barrel. Other commodities behaved in similar fashion. These surges didn’t come about because of natural demand but because of a declining dollar. Nevertheless, most people took to heart the message that the rising prices seemed to convey: All these things were becoming dearer. The misinformation conveyed by prices resulted in hundreds of billions of dollars being misinvested, particularly in the building of houses.
Everyone understands the basic need for fixed weights and measures in daily life: the amount of liquid in a gallon, the number of ounces in a pound, the number of minutes in an hour. None of these amounts fluctuate; they are unchanging.
Just as we use a scale to measure something’s weight, we use money to measure the value of products and services. If the measuring rod itself becomes unstable, the smooth functioning of an economy is disrupted, just as our lives would be if the number of minutes in an hour constantly fluctuated.
