Thread: In this brief video, Steve Forbes says that there are "mountains of myths surrounding the gold standard, all of them wrong." But he himself subscribes to several: forbes.com/sites/stevefor… 1/
Myth #1: "When you see the price of it [gold] fluctuate, what you see is the value of the dollar fluctuating." Of course the dollar's value _in terms of gold_ fluctuates neither more no less than gold's value in terms of the dollar. The relevant question... 2/
...is, "which is fluctuating more in terms of the prices of goods in general?" Have a look at this chart comparing relative changes in the $ price of gold and the CPI since the end of the last recession, and decide for yourself: 
Myth #2: "The U.S. was on a gold standard from the time of George Washington until the early '70s." Actually, the U.S. was originally on a "bimetallic" standard, with the USD standing for both a quantity of silver and a quantity of gold. In practice... 3/
This meant that one metal was the _true_ standard sometimes, and the other at other times. From the opening of the U.S. Mint in Washington's day until 1834, we were on a de facto SILVER standard. 4/
After 1834 we were on a de-facto gold--but not always. We were on a paper (Greenback) standard from 1862 until 1879, and the dollar floated during most of 1933. The gold value of the dollar was also changed on three occasions. Details here cato.org/sites/cato.org… 5/
Myth #3: In the early 1970s the link between the dollar and gold was "mistakenly severed." "Mistakenly" isn't the right word: the fact is that the "London Gold Pool," which by then was what held the post-WWII gold standard together, fell apart: en.wikipedia.org/wiki/London_Go… 6/
Nixon could not have kept that "Bretton Woods" system together had he wanted to: Fed-assisted Vietnam and Great Society spending had created far too many dollars. The dollar either had to be devalued, or it had to be left to float again. The real mistake, IMHO...7/
was the Bretton-Woods gold standard itself, which was inherently unstable and bound to fail (as Robert Triffen correctly predicted). nytimes.com/1993/02/27/nyr… 8/
The Bretton-Woods system is another reason why it makes little sense to speak of "a" gold standard that existed for one or more centuries, in the U.S. or anywhere else. 9/
Myth #4: The decline in the rate of economic growth since the 1970s is "why the cost of living keeps going up." A surprising claim for a hard-money fan, since it denies any role for Fed-assisted demand growth in causing prices to go up. That's letting the Fed off rather easy! 10/
Myth #5: "Money is a measure of value." Aristotle thought so. But he was wrong. Prices are expressed in terms of money, but money doesn't"measure" value. If 12 eggs cost $3, that tells you that the seller values $3 more than he or she values 12 eggs. But that's all.
Don't get me wrong: I also agree with Forbes that critics of the gold standard subscribe to many myths of their own. I've pointed to some of those myself (alt-m.org/2015/06/04/ten…). I'm not anti-gold: I'm just anti myth!
