A return to the gold standard is a terrible idea. Why would one want as a monetary policy objective to stabilize the price of a useless metal? As opposed to say employment and the price of a large basket of goods? Look at the volatility of gold prices when not targeted 1/n

now imagine the swings in interest rates necessary to target a constant price. Say you are hit by a pandemic, the demand for gold is high (why I'll return to), monetary policy has to tighten or you have to go through sustained deflation just to keep the price of gold constant 2/n

The modern prescription is the opposite. Cut rates to keep overall demand high and avoid deflation. Let the price of gold do whatever it will do, go up to 4000, who cares? Apparently some people do 3/n https://www.nytimes.com/2020/07/22/opinion/federal-reserve-judy-shelton.html?surface=most-popular&fellback=false&req_id=516375511&algo=top_conversion&imp_id=285825055&action=click&module=Most%20Popular&pgtype=Homepage

You may wonder...if the gold standard was such a terrible idea why did we have it for so long? Because if the only alternative is the prince printing coin at will to finance the court's exuberant spending with runaway inflation...then sure the gold standard is better. 4/n

By the 1920s it became clear that we had better institutions to deal with this problem. Keynes argued not to return to gold, or at least not at the pre WWI parity. Churchill got it wrong, a truly expensive mistake, that brought the monetary system down after much pain in 1931 5/n

What has remained is the apocalyptic fear that we could lose all our economic institutions, and we'd have to go back to gold. This fear motivates, apparently, the demand for the metal during crises. The fear seemed irrational...but I guess a Fed candidate is arguing just that 6/n

High inflation has not been an issue for a long time in developed countries. Increasing government debts are an issue on the far horizon, but certainly not one the gold standard is an answer to. End of a long thread about a policy I never thought we'd have to debate again 7/n

For those truly nerdy. Keynes two books on this topic are some of my favorites: n/n

https://www.amazon.com/Tract-Monetary-Reform-Maynard-Keynes/dp/1607960818 https://link.springer.com/chapter/10.1007/978-1-349-59072-8_17