Blogging at Free Banking, Kurt Schuler wants us to have a debate about gold (as in the gold standard).
I will concede that there is, as he states, much superficial dismissal of the utility of a adopting a gold standard. It is also true understanding the dynamics of gold, silver and bimetallist standards are a necessary part of understanding economic history; not merely for the periods when such standards applied but also for understanding what happened after and why. Such understanding requires a certain level of serious reading and thinking about gold, silver and bimetallism standards, if not quite the "necessary dozen books" Schuler specifies as required (though the list he puts up is an excellent one). Brian Selgin has recently made available a very useful paper on the history of the gold standard in the US.
The problem is the pointlessness of engaging in a "debate" when there is almost no chance of getting agreement about what that historical record tells us.
Take Austrian school economist Steve Horwitz's claim that
If we had a commodity-based free banking system, we would not have had the boom and bust of the 2000s in the first place.Possibly not, though adding in free banking to a discussion of the gold standard rather muddies the issue. For, under the gold standard it certainly was possible to have a dramatic boom and bust; it was called the Great Depression. Which makes Steve Horwitz's further claim:
that a gold standard ties the Fed’s hands is exactly the reason to favor it, not oppose it. The Fed was primarily, though not solely, responsible for getting us in this mess in the first place precisely because its hands were free to flood the market with artificially cheap credit.somewhat less than persuasive. At this point it also becomes clear that no genuine debate will happen, for defenders of the gold standard will immediately claim against citing of said Great Depression "but that was not a real gold standard".
Which is true in the sense that the interwar gold standard was a gold exchange standard managed (or rather mismanaged) by central banks rather than the gold specie standard that had prevailed before the Great War.
Moreover, the reason the interwar gold standard was not a "pure" gold standard was that such a standard would likely have collapsed much more quickly. It was precisely the massive deflationary risks (of the ugly monetary contraction kind) attendant on going back on the gold standard after the Great War inflations, as Swedish economist Gustav Cassel repeatedly warned of (pdf), that led to the various measures to reduce monetary demand for gold in the first place.
More broadly, the problems of 1928-32 were just the most intense example of a much wider problem with metal monetary standards -- the great vulnerability being on a gold, silver or bimetallist standard generates to the actions of other countries. Whether it is France abandoning bimetallism out of fear of (pdf) newly-unified Germany dumping silver onto international markets as it shifted to the gold standard or the UK being pushed into a lower rate of economic growth by expansion of the gold standard in the 1870s or countries in the goldzone being dragged into the (ugly) deflation (pdf) by the Bank of France and (pdf) the US Federal Reserve in 1929-32 or China being forced off the silver standard in the 1930s due to FDR's silver-buying program to placate silver-State US Senators driving up the price of silver, again and again being on metal-standard money has created grave vulnerability to the actions of other countries.
But none of this will count, because either the historical record will be disputed or some ideal version of the gold standard will be paraded which, by virtue of being wildly ahistorical (either in its take on the past or its sense of the present or both), will be immune to the burden of history.
Particularly if you add in free banking. But if one wants to have a debate about free banking, by all means lets -- the periodically truly appalling record of central banks certainly gives plenty of grounds for such a debate. Just don't mix it in with the gold standard as that distracts from attention to the performance of central banks.
The gold standard glitters so strongly in the minds of its adherents because you can always turn it around in such a way that all one gets is the bright shine of hope without any of the tarnish of history. For the gold standard of adherents is typically a thing of faith, not of history. One is then dealing with religious faith parading as economics and such faith is not subject to the refutation of mere worldly facts. So, let's not have yet another round of theological debate parading as economics.