Talk about cancel culture! For years the gold standard, under which the United States successfully operated from the time of George Washington to the early 1970s, has been the great unmentionable in government and academic circles, where even discussion of the topic is derisively dismissed.

Inflation never occurs with a gold standard. Under one we’d have been spared the calamity of the 2008–09 financial crisis, the subsequent unprecedented suppression of interest rates and the binge of money printing before and during the pandemic, all of which have led to the mess we’re in today.

Money is a measure of value, just as scales measure weight, clocks measure time and rulers measure length. We instinctively understand the need for fixed weights and measurements in the marketplace. The volume of a gallon doesn’t change each day, nor does the number of ounces in a pound, the inches in a foot or the minutes in an hour. An economy works best when its currency is a reliable measure of value. Money that is fixed in value makes buying, selling and investing easier, just as fixed weights in grocery stores make it easier to shop – a pint of ice cream today is the same size and amount as it was yesterday.

For a variety of reasons, gold has for thousands of years kept its intrinsic value better than anything else – better than silver, platinum, palladium, copper, coconut shells or cryptocurrencies. When the price of gold changes, it’s not the value of the metal that’s changing; it’s the value of the currency the gold is being priced in that is fluctuating. If we returned to a gold standard and fixed the dollar to the yellow metal at, say, $1,900 an ounce, all that would mean is that if the price of gold rose above $1,900, we’d reduce the money supply. If it went below that, we’d increase the money supply. Contrary to myth, a gold standard doesn’t artificially restrict an economy’s money supply; it simply means that the money created has a stable value.

From 1775 to 1900, when we expanded from a small agricultural country into an industrial ­giant, the U.S.’ money supply increased 160-fold, while the gold supply increased only about threefold. Without really intending to, the U.S. blew up the post-World War II gold standard in the early 1970s, and we and the world never went back on it. We have suffered for that decision with an ­average economic growth far below our historic track record. Consider this: From the late 1940s – after recovering from the distortions of World War II – until we abandoned the gold standard, the average annual growth rate of the U.S. was around 4.2 %. After that, until the pandemic, the average was 2.7 %. Had we maintained our gold-based average, the median household income in the U.S. would now be around $110,000, not today’s $70,000—$40,000 more.

History’s lesson is clear, even though people who should know better don’t want to face up to it: A nation always performs better when on a gold standard. That and low tax rates are fundamental for long-term prosperity. Always. So toss out the taboo on gold, and let the debate begin.

Steve Forbes
Forbes USA