Over the weekend of November 6-7, 2010, World Bank president, Robert Zoellick , proposed in a column written for the Financial Times that the global economy once more be linked to gold as an anchor to help maintain currency stability and reduce inflationary expectations in international markets...
But in spite of Wolf's concerns, it can be argued the costs of a gold standard are far less that the costs that have been imposed on society from a century of gross mismanagement of the monetary system by governments around the world. Since 1914, when the Federal Reserve System came into operation as America's central bank, and the beginning of the First World War that same year, the world has experienced severe inflations, including a number of hyperinflations, and the rollercoaster of several booms and recessions, including the Great Depression of the 1930s and the current global economic downturn.
Placing the fate of the world's monetary system in the hands of monetary central planners, who have had all the discretion imaginable through their control of paper money instead of gold, has not secured an inflation- or recession-free economic environment...
Finally, Wolf's concern that a real gold standard would tie the hands of governments and central banks from having the discretionary authority to manipulate the monetary system should be considered a "plus," not a minus. Only the most doctrinaire Keynesian can deny or fail to see that past recessions and the current economic downturn were all preceded by unsustainable booms resulting from monetary expansions and interest rate manipulations that threw savings and investment out of balance, artificially stimulated misplaced construction projects, and misdirected labor into employments that became unprofitable to maintain once the inevitable financial and investment bubbles burst...
Monetary central planning has worked no better than any other form of central planning over the last one hundred years. The world's central bankers – just like the central planners in the old Soviet Union – just do not have the knowledge, wisdom and ability to successful manage the monetary system of a market economy...
The return to a market-based money such as gold, therefore, is both possible and desirable. And it would be most effective in acting as a barrier against any further government abuses of the monetary system, if such a return to gold was introduced through the freeing of banking and financial markets from the heavy-hand of government, as well.
The next phase of our post-communist world may very well require the end to monetary socialism, which is what central banking really represents.
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