The gold standard poised to return?

Well, that hardly seems likely. But it's nonetheless interesting that Robert Zoellick, head of the World Bank, of all places, referred to the possibility of using gold in some way to help stabilize the international currency system. That's a long way from referring to the idea of a gold standard as a "barbarous relic" of nastier times. Of course Zoellick explained that he wasn't talking about an actual; gold standard, oh, no, just some way to use gold (in ways I have yet to see him specify) to stabilize what is inherently an unstable system with all those paper currencies based on the will-o-the-wisp of full faith and credit. Still, an interesting step.

I have noted many times that governmentalists seldom if ever adopt a more freedom-oriented approach to policy unless and until an entire subsystem is falling down around their ears. we didn't get airline deregulation until the system was widely acknowledged to be a complete mess, or welfare reform or school choice. It's hardly flattering to those of us who spend our lives trying to make sound arguments for freedom that little steps in the direction are seldom the result of our persuasiveness and sound arguments, but there it is. So I'm thinking the international economic system is unstable, but not so disastrous that they'll consider anything resembling a gold standard -- yet.

Bear Stearns crisis makes case for gold

I'm not much of a gold bug, although I certainly can appreciate the case for a gold standard and the critiques of fractional-reserve banking. The current crisis that the government and the Federal Reserve are having so much trouble dealing with -- the fire they are pouring gasoline on -- certainly makes something of a case. Robert Samuelson, in a recent column, explains how convoluted the financing/banking system has become. Mortgages aren't often kept by the institution that issues them, but are "securitized" -- packaged with other loans and sold to inveswtros. The current crisis is likely to affect more of the economy because the system is so convoluted and not the least bit transparent. Without fractional-reserve banking, such convolution would be almost impossible. Bank runs like Bear Stearns couldn't happen, because banks could lend out only on nthe basis of the funds they have on deposit.

The other problem is loss of confidence in the dollar, due largely to thr Fed pumping in more Fed-created money into the economy. The Fed's response? Lower interest rates more so as to pump in even more funny money! It's a quintessentially short-term, not to say desperate approach, that will only make the problems worse in the long run. With a gold standard the government wouldn't be able to manipulate (and more often than not, mismanage) the money supply so irresponsibly.