It’s not Kim Jong-un or Vladimir Putin, Ali Kamenei or even Abu Bakr al-Baghdadi. And certainly not Hillary, Bernie or Donald, all of whom are pretty flexible and negotiable when it comes right down to it. It has just come to my attention that Ted Cruz wants to restore the gold standard, abolished to end the spiraling deflation of the Great Depression in 1933.
The gold standard in the US was only adopted fully in 1900 by then president McKinley. It was part of a movement to ease world trade. By 1913 countries all over the world were having trouble with it. After only 33 years the US was forced off it, and Roosevelt confiscated all gold except for jewelry to prevent a de facto standard.
What’s wrong with a gold standard? Nothing if you live in Lydia where a river flowing down from the mountains coats everything with gold. That’s where in 600-something BCE King Croesus first popularized the gold standard. It was basically a scam Lydia perpetrated on the world, because they had plenty of it. Before that, grain had been money for 2000 years, and in fact you could and did eat it.
If you have a technologically progressing society, it will produce more and more each year. If prices are determined by a fixed amount of gold, prices will get less and less every year. That may seem fine until you realize also the value of your house or business investments will get less as well, and pretty soon your banker will inform you that all your loans are due and you are underwater on them. You would know this if you had read Money, Wealth & War.
A Reuters story by Johnathan Spicer on April 7, 2016, discusses the Fed and the election, and calls from the likes of Bernie Sanders and Donald Trump for review of the Fed’s actions. I’m a bit critical of this, because I think a politically independent Fed is important. But at least it is only a review, not a call for disastrous policy.
It’s true the likes of Rand Paul, and before that his dad Ron Paul, have wanted to abolish the Fed and go on a gold standard. These men were not particularly dangerous because they stood no chance of accomplishing their desires.
The people I listed at the beginning all “might” start a war, and one or two of them might even use a nuke or two. Terrible as that is, we would mostly survive. I am not at all sure we would survive a gold standard implemented by an ideologue who would not quickly realize his mistake and retreat. Trump if pretty quick to retrench and recant when he realizes a boo-boo. Bernie I don’t know about, but what chance does he have of becoming president? Clinton would surely leave the Fed alone. Cruz, though, is all about ideology, and since the Wisconsin primary, appears to have a plausible chance of becoming president.
If so, and if he gets a majority in Congress to implement his gold standard, or even by virtue of his future appointments to the Fed board of governors makes it overly conservative, then your house price will crash and you will be laid off – along with pretty much everyone else – and you won’t really care whether you had been in a bubble or not, you’ll just regret that everything you had is unnecessarily gone.
That makes Ted Cruz currently the most dangerous person on planet Earth.