Economist Benko: It May Be Time to Revive the Gold Standard

Thursday, 02 May 2013 08:01 AM

By John Morgan

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The prospects for the United States to implement a 21st century gold standard are rising sharply, according to economist and author Ralph Benko.

Writing in Forbes, Benko acknowledged official and academic debate about establishing a new gold standard has been out of favor and even given fringe status in recent decades.

However, recent global economic turmoil and ultra-loose monetary policies may have given the debate fresh impetus. Critics say major governments’ monetary policies have debased sovereign currencies and that gold could be an alternative.

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In any event, Benko, a former Reagan administration official, is firmly on the side of those who believe a new gold standard should be given serious consideration.

“Whether one supports it or opposes it, the gold standard no longer is seen by most serious thinkers as fringe,” he wrote in Forbes.

Benko, editor of the Lehrman Institute’s “Gold Standard Now,” said analysts at the Bank of England recently tackled the topic.

The analysts “assessed the performance of the fiduciary dollar standard and found it deeply inferior to the actual performance of both the gold and of the … gold-exchange standard,” he noted.

The gold standard is a monetary system in which the standard economic unit of account (e.g., the dollar in the United States) is based on a fixed quantity of gold. President Nixon dropped the gold standard in 1971 and opened the era of a fiat dollar.

Benko noted Rep. Kevin Brady, R-Texas, chairman of the Congressional Joint Economic Committee, has introduced one bill to stabilize the dollar with gold, and another to convene a bipartisan monetary commission to study six monetary policy regimes, including the gold standard.

Meanwhile, about a dozen states have been considering state legislation to establish gold as legal tender.

Thus, Benko maintains the notion of reintroducing the gold standard has “entered the mainstream.”

“The conservative, libertarian and Tea Party Republican voter base, and the ethnic and union members of the Democratic voter base, are receptive. Interestingly, blacks and union members, when polled, appear even more enthusiastic for gold than libertarians and conservatives….”

A CNBC poll last month found Americans chose gold as their top investment choice, higher in preference than real estate, stocks, savings accounts and bonds.

Forty-five percent of Tea Party supporters preferred gold, compared with 35 percent of the overall public. And half of those who think their home values will decline in the next year chose gold as the best investment bet, the survey found.

CNBC said other groups leaning toward gold as a top investment choice included men, respondents with few stocks investments and those with a high school education or less.

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