Mark Twain once said, “The reports of my death are greatly exaggerated.” And speaking of an overstated demise, the same can be said these days regarding the U.S. dollar. Indeed, there isn’t a day that goes by that I don’t hear or read various pundits continuing to shout the praises of gold as the next currency. In fact, according to these so-called experts, it seems as though we’ll be utilizing gold in order to do our Christmas shopping sooner rather than later.
Nevertheless, I must declare strong support for the highly coveted precious metal. Lord knows I bought enough of it over the years in the form of rings, bracelets, and necklaces. Yet, I’ve never had a daughter, granddaughter, girlfriend, or wife (not necessarily in that order) open a wrapped box containing gold jewelry and proclaim, “Thanks, now we can go shopping, I finally received some money.”
My point is that I’m perhaps one of the greatest supporters of returning to the gold standard. That’s because fiat currency always presents the opportunity for the central bankers of the world to manipulate the money supply, a deplorable action that benefits the bankers at the expense of most everyone else. (Think ZIRP.) However, what makes a return to the gold standard difficult is that most people have no clue how it operates or how it works.
The great classical economist, David Ricardo, the father of “comparative advantage”(the cornerstone of free trade), once proclaimed that a country could institute a gold standard while holding no gold whatsoever in their vaults. That type of thinking is so alien to most people that it creates an almost insurmountable roadblock.
However, the “inflationistas” continue to pound the table regarding the notion that we will instantaneously sidestep the gold standard altogether, thereby immediately establishing pure gold as our direct currency. After all, for centuries, didn’t traders, businessmen, and shoppers carry pouches filled with gold coins? In those days, if you wanted a meal, a room, or a suit of clothes, it cost a certain number of gold coins. And that’s the problem.
Imagine that Walmart, Safeway, or even your local gas station accepted gold coins in lieu of paper dollars. Can you just visualize the clerk at the cash register trying to make change? Perhaps the clerk would take a sharp knife and shave a little off the edge of the coin. And much like they do these days to verify that a $100 bill is real, how would someone check to ensure that a gold coin is genuine? Will store employees be taught to bite into the coin? That would be quite interesting to watch.
Yes, gold as a currency might appear to be very captivating. But it presents seemingly unimaginable day-to-day difficulties, thus giving significant credence to Mark Twain’s famous quote (paraphrased of course), “The reports of the dollar’s death are greatly exaggerated.”