Eichengreen on Gold

There's a kinda sorta must-read up at The National Interest right now by Barry Eichengreen, called A Critque of Pure Gold," shorthandable as "Eichengreen against the gold bugs."   Eichengreen is the gold standard of monetary historians working today but I kinda sorta hedge my bets because the piece, for all its palpable merits, appears to tangle three or more topics into one.   Foremost, there is the matter of "the gold standard" itself and why, in Eichengreen's perspective, it wouldn't solve our problems.    Gold bugs have succeeded in making this a topic of central importance and there is nobody better equipped than Eichengreen to present the "nay" case.  He does so in a serviceable manner although notably, he gives more time and attention to the "impure" gold standard--gold-pegged currency controls, like the system Richard Nixon threw over in 1971.  Apparently Eichengreen thinks (and he would probably be right) that support for any hairy-chested purity is ephemeral enough that it doesn't deserve much attention beyond the title.

All right so far but Eichengreen also undertakes to present a fascinating if somewhat diversionary account of how gold came to be so central to modern libertarianism.   As Eichengreen points out, there's no essential  link between libertarianism and gold; the iconic Friederich von Hayek had no particular love for gold (he preferred "free banking").  As we know, Milton Friedman was no special fan either.  The key seems to be Ron Paul: Paul embraced gold and Paul has stood for some years now at the head of the libertarian parade, and so gold has a place along with him.   It's a good story and worth telling in its own right though I am not sure it helps to clarify matters here.

Moreover, I don't think Eichengreen really puts his finger on the one reason why the gold standard has become so popular with libertarians: it seems to take money "out of politics."  "Politics" being, virtually by definition, a limit on "freedom," gold therefore ehances "freedom," QED.  I think I've spoken out before on why this seems so goofy to me: one, the decision to "choose gold" would, in some sense, be a "political" decision--and any polity that could make the decision could later change the decision, by the same political process.   And two, embracing gold doesn't seem to me so much an enhancement of sovereignty as a surrender--from the pinheads in Washington to the proverbial gnomes of Zurich.

ichengreen provides splendid background on these issues in books like Globalizing Capital and Exorbitant Privilege.  I admit I haven't read his big book on gold--$43.14 on Kindle.   Setting that one aside, I'm still waiting for someone to state the case against gold as coherently as the case for it is set by 
Benn Steil Manuel Hinds

Hugo Pulls a Goldfinger

...and Joel thinks it would make a great movie:

Massive security headache as Hugo Chavez orders 100 tonnes of gold bullion stored in Bank of England vault back to Venezuela

By TED THORNHILL

It’s the sort of news that would make greedy Bond villain Blofeld sit up – Venezuelan president Hugo Chavez wants the 211 tonnes of gold he’s storing overseas, much of it in Britain, shipped back to Caracas.

Security experts say the operation to transport it safely will be enormous as that amount of gold – 17,000 400-ounce bars – is rarely moved around.


What’s more, flying is out of the question because no insurance company would be able to cover a single aircraft carrying a consignment of gold this big, which is worth £7 billion. This means that ships will have to be used, which are far more vulnerable.

Newspapers seem to be all guesswork as to what he might be up to.  My guess: he's suddenly waked up to the fact that somebody might find it in a British bank and try to offset it against an uncollected debt.  Can't blame him.  Maybe the Iranians told him what happened to them after 1979.

Afterthought.  Hugo goes into a bar with the parrot on his shoulder.  Bartender says "hey, where'd you get that?"  Parrot says: "Oh, we got it from some guy who used to live in France."

First-ever Underbelly Gold Price Commentary

I see that the price of gold hit $1,177.12 this evening. That's getting on towards 40 percent of the price at the end of the previous gold boom in April 1980.

Except that it isn't. Adjust for inflation and the 1980 price of $850 translates into a today price of $2268. So we've got a ways to go.