Former Fed Chief Paul Volcker on the Gold Standard

Writes Ralph Benko at the Forbes.com (bold added)

There is an almost superstitious truculence on the part of world monetary elites to consider the restoration of the gold standard.  And yet, the Bank of England published a rigorous and influential study in December 2011, Financial Stability Paper No. 13, Reform of the International Monetary and Financial System.  This paper contrasts the empirical track record of the fiduciary dollar standard directed by Secretary Connally and brought into being (and then later administered by) Volcker.  It determines that the fiduciary dollar standard has significantly underperformed both the Bretton Woods gold exchange standard and the classical gold standard in every major category.

As summarized by Forbes.com contributor Charles Kadlec, the Bank of England found:

When compared to the Bretton Woods system, in which countries defined their currencies by a fixed rate of exchange to the dollar, and the U.S. in turn defined the dollar as 1/35 ^th of an ounce of gold:

• Economic growth is a full percentage point slower, with an average annual increase in real per-capita GDP of only 1.8%
• World inflation of 4.8% a year is 1.5 percentage point higher;
• Downturns for the median countries have more than tripled to 13% of the total period;
• The number of banking crises per year has soared to 2.6 per year, compared to only one every ten years under Bretton Woods;

That said, the Bank of England paper resolves by calling for a rules-based system, without specifying which rule.  Volcker himself presents as oddly reticent about considering the restoration of the “golden rule.” Yet, as recently referenced in this column, in his Foreword to Marjorie Deane and Robert Pringle’s The Central Banks (Hamish Hamilton, 1994) he wrote:

It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.’ The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.

The coming horrid consequences from the rampant unsound money policies based on the incumbent fiduciary dollar-central banking standard will eventually force the world to look and consider not only the re-adaption of gold standard but even possibly a depoliticization of money (which means End the FED, end central banking).

End the Fed movement have been sprouting even in Germany (see video below)