Why do Governments and Politicians hate the gold standard?

 

Once societies began using paper, it was easy for governments to print new money, even if they had not collected any gold to redeem with the paper banknotes.

Throughout history, this has been a popular way for governments to generate new money, because it was easier than other options, such as collecting taxes. Although this was good for politicians, it was bad for the rest of us, as our money lost its value,  and this is called inflation.

This explains why people who have begun to see these matters in a clear light have turned anew to the idea of Metallic money and are asking that gold come out of the depositories and vaults of the central banks and return to the pockets and purses of private individuals, for gold is the only really sound money with intrinsic value. 

The desire for a return to gold is understandable, and we hope to see it realized some day., although the argument in favor of the gold standard is not always stated in a valid way.

The distinctive function of gold money does not consist in its intrinsic value or in the constancy of that value, which fluctuates even in the absence of government intervention.

The excellence of metallic money in free circulation consists in the fact that it renders impossible the abuse of the power of the government to dispose of the possessions of its citizens by means of its monetary policy and thus serves as the solid foundation of economic liberty within each country and of free trade between one country to another.

 

*Originally published “Essentials of Economics” page 51

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