The influential British economist, John Maynard Keynes, once denounced the gold standard as "a barbarous relic"1, inferior to the wisdom and sophistication of central bankers in managing a nation's currency and monetary policy.
It would just be a bit too gauche to laugh, wouldn't it? After all, that's been the received wisdom of university professors, politicians, and central bankers for decades.
So imagine the absolute cheek of World Bank president, Robert Zoellick, who on November 8 at the G-20 Summit, suggested that leading world economies should adopt a "modified gold standard" in order to reassure the public and financial markets in the aftermath of the recent worldwide financial meltdown. "The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values." 2
Of course, he was immediately rebuffed by representatives of all the "leading economies", and Zoellick himself felt the need to soften his statement.
Nevertheless, with our own Federal Reserve and other central bankers in a seeming suicide pact to see who can devalue their currencies the fastest and the mostest, a discussion of a new gold standard seems not at all out of place to me. I'll have more to say about that in the December issue of our print newsletter, Flourishing.
Until next week,
PATIENCE, DISCIPLINE, CONFIDENCE in the FUTURE! mh
1 A Tract on Monetary Reform, page 172, Macmillan, London, 1923.