forbes.com
Inflation and the Case for a Gold Standard
The article analyzes the causes of US inflation, contrasting the current system with the historical gold standard, arguing that a return to the gold standard is the only viable solution to control inflation.
- How does the author's proposed solution of returning to a gold standard compare to current economic policies and historical practices?
- The author contrasts the post-WWII Keynesian economic model, characterized by currency and interest rate manipulation and 'fiscal stimulus', with a 'Magic Formula' of low taxes and stable money. The author argues that the latter, exemplified by the US's historical adherence to a gold standard until 1971, led to greater economic prosperity, while the former contributes to inflation.
- What is the primary cause of the current inflationary pressures in the US economy, and how does it compare to the historical approach of maintaining a stable currency?
- The US economy's current inflationary pressures, exemplified by rising hamburger prices from $0.10 in 1950 to a significantly higher amount today, are attributed to a decline in the dollar's value. This devaluation is linked to the abandonment of the gold standard in 1971, contrasting with the stable currency maintained for 179 years prior under the Coinage Act of 1792.
- What are the potential long-term consequences of continuing with the current monetary policies, and what are the potential challenges of re-establishing a gold standard?
- The author advocates for a return to a gold standard to stabilize the dollar's value and curb inflation, arguing that the current system, where the dollar's value fluctuates daily, is unsustainable. The author suggests that this solution, while drastic, is the only proven method to control inflation and points to historical precedent.
Cognitive Concepts
Framing Bias
The narrative frames the current economic system as inherently flawed and the 'Magic Formula' as the only viable solution. The headline (if there was one) would likely reinforce this, emphasizing the failures of current policies and the supposed success of historical gold standards. The use of loaded language like "stupid" and "utter waste" further emphasizes this bias.
Language Bias
The author uses loaded and emotive language to discredit opposing viewpoints. Examples include 'stupid notion,' 'utter waste,' 'economic high priests,' and 'dumb as ours.' These terms lack neutrality and create a biased tone. Neutral alternatives might include 'inefficient policies', 'unproductive spending', 'economists', and 'central bankers'.
Bias by Omission
The article omits discussion of alternative economic theories and approaches beyond Keynesianism and the author's proposed 'Magic Formula'. It also fails to acknowledge the complexities of inflation, reducing it to a simple issue of currency devaluation. The potential benefits of modern monetary policy are not considered.
False Dichotomy
The article presents a false dichotomy between 'Stable Money' (tied to gold) and the current system, ignoring the nuances of monetary policy and the various approaches used by different countries. It oversimplifies the complexities of economic management.
Sustainable Development Goals
The article advocates for stable monetary policy, arguing that it benefits economic stability and reduces inequality by preventing inflation that disproportionately affects lower-income groups. Stable currency values prevent erosion of purchasing power, protecting vulnerable populations from the increased costs of essential goods and services.