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How To Argue Against the Claim That The US Had 5 Depressions BECAUSE of The Gold Standard

I have been arguing with a friend who is blindly "LEFT". He has been bashing the gold standard because "republicans talk about it, so it is evil". He is using this article to argue his stance: http://www.classwarfareexists.com/republican-party-platform-...

I admittedly dont know my history enough to explain exactly why he is misguided. I thought maybe some of the extra sharp DailyPaulers could give me some arguing points!

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"Republicans Talk About It"

Only Ron Paul (and possibly Gary Johnson) have talked about it. Mitt Romney talks of a gold commission only as a weak attempt to try to win RP supporters to his side. Romney would never really be for it. He believes in central banking and central planning.


To quote Admiral Ackbar. :P Have you ever considered that maybe your friend is right?

While I've come to realize the evils of debt-based fiat paper money, I've also uncovered a grave historical fallacy that many Austrian economists and Libertarians seem to have glossed over: The Gold Standard has been used as a weapon of central banks in America since its inception.

Gold is a precious commodity in short supply, and thus an easily-cornered market; unfortunately for us "commoners", it's already been cornered. By who, you may ask? Why, the very central banks that decry gold as money! They stole most of it from Americans with Executive Order 6102 and the raiding of Fort Knox, and have been buying up plenty of it ever since. So, while a return to the Gold Standard would undoubtedly end the erosion of our money's value through the printing press, our economic fate would be in the hands of the same people when all's said and done. To reiterate: IT'S A TRAP!

The Free Silver movement of the late-1800s and the argument for bimetallism is certainly worth investigating, as is William Jennings Bryan's famous "Cross of Gold" speech. I'd also recommend looking into what Lincoln did with Greenbacks or Pennsylvanian colonial scrip, both debtless paper monies. The documentary "The Secrets of Oz" is a great introduction to all of these concepts.

So in short, a hard commodities standard is certainly an excellent way to end our current status as wage slaves, but basing it on gold alone is a dangerous folly. Silver and other hard assets MUST be part of the equation as well.


"The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else."
-Frederic Bastiat

The majority of the gold..

..is in private hands. Admittedly, rich people have more than I have, but metal is and always has been my savings account and insurance policy. As far as bimettalism goes, it is inherently stable. A free market will determine the exchange ratio between metals, and silver coin will likely serve alongside gold and DisneyDollars and possibly thousands of alternatives. Easy prediction: gold and silver will dominate, and paper currencies tethered to both will probably be the most stable.

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You should be able to find all the info you need here

in these lectures by Tom Woods. You'll be more than adequately prepared to argue the point. Furthermore, the knowledge bombs he drops in these videos will render that article you linked to completely useless. He refutes it so entirely so as to make it look erroneously silly.

Spend a little time and watch them, they're well worth it.



If you only want to concentrate on finding your needed answer, then I believe he directly addresses your question in the following:

...and if your friend is the kind of idiot who likes to slam free market capitalism as only being beneficial to wealthy pigs at the expense of the so-called proletariat, then I suggest the following:



Thank you!

I'd rather have a bottle in front o' me than a frontal lobotomy

First, there is no difference between a recession and a


Since the Great Depression, the government started calling them "recessions" so it didn't evoke panic and fear, and so their policies didn't look to be failing as much as they were.

Looking at statistics alone, some of our "recessions" since WWII were far worse than many "depressions" before 1929.

Second, depressions are the result of burst bubbles of mal-investment.

Mal-investment is what happens when people get the wrong economic signals as to what is going on.

They get these wrong signals from distortions in the market.

They are able to mal-invest because "money" or more likely "credit" is cheap and easy to obtain. This is the primary contributing distortion.

Gold is blamed for depressions because it is wrongly seen that since gold can't be created out of thin air to give to people to prime the pump, then the economic "engine" slows down until confidence restores over a long period of time.

However, gold didn't CAUSE the downturn. A burst bubble did. The bubble was caused by easy credit. (something a HARD currency doesn't allow for - you can't make gold out of thin air, it is hard to obtain, so people aren't likely to speculate wildly with it)

The bubble always bursts because bubbles are essentially pyramid schemes built off of con-games.

A gold and silver coinage - without paper notes, or credit, would preclude any serious possibility of a large or widespread bubble and thus a large or widespread depression.

Certainly, local fools may exist, but their damage will be necessarily limited in scope and size.

Make sure though, you understand and keep clear the distinction between a gold (and silver) monetary system in the form of coinage, contrasted with a paper note system of currency, allegedly "backed" by gold or silver.

The later will ALWAYS collapse, will always give way to easy credit, and will always bring mal-investment, bubbles, and depressions.

A real hard monetary system practically can't.

Remember, the Federal Reserve Notes were initially "backed" by gold. The propensity to inflate, spend, and make war, eventually debased their value enough on the open market that the backing had to be abandoned first for domestic purposes, and finally for foreign ones.

So in that since, yes, gold "backed" paper DOES lead to depressions.

But GOLD itself does NOT.

There is also an important point to consider, that going with gold alone is a recipe for disaster with respect to extreme poverty and gridlock financially.

While prices would adjust, there is not enough gold practically to function as the sole medium of exchange. This was even the case in 1792. Silver has been used as a "poor man's money" for nearly 500 years. It supplanted the vacuum left by gold held by elites.

Now we have the practical problem that with so many more people, and so much more economic activity, to divide up gold small enough to be useful for everyday purchases, you'd have to make it smaller than a gram. That isn't convenient. It's too small.

So silver fills the role for smaller purchases, and there's enough of those two most likely to handle the job.

If not, that's what a free market is for. The market would fill any remaining gaps with copper, nickel, palladium, and platinum coins.

This is why it's okay to have officially minted coins, but we should never allow a monopoly on them. The market should be free to find solutions to omissions in the official line-up or offerings of monetary products.

Does that about sum it up for you?

Wow. Excellent points.

1) A gold standard with paper still leads to depressions.
2) With a coin-only system we need a variety of metals to facilitate transactions.

I can envision stores quoting their prices in ounces of metal according to their ratios. Currently, gold, silver and copper are:


I think the ratios will quickly trend back to historical levels though.

Which is closer to:


Which is nearly what the Coinage Act of 1792 established.

This was based on long term historical data, but it turns out, this is also nearly the ratio of how much ore you find in a mine. So I would look to mining data ratios to see where we are headed. This isn't a coincidence, since they describe the relative availability of metals, and since price is merely a ratio, then relative quantities should match closely with "price."

thank you

For taking the time to lay all of that out. I will be beating him over the head with this info asap! ;)

I'd rather have a bottle in front o' me than a frontal lobotomy