Gold standard supporters are a stubborn lot who, despite ridicule, carry on their fight in a fashion reminiscent of Don Quixote. Like that of the quixotic crusader of yesteryear, their fight is noble and seemingly devoid of personal benefit. They fight against the injustices of the current system which enables plunder and exploitation to accrue to a ruling class.
Gary North puts the matter into perspective:
The arguments by American critics of a gold standard all rest on this unstated presumption:The economic outcomes of policy decisions made by a committee of 12 salaried bureaucrats, 7 of whom were appointed by the president of the United States, and 5 of whom were appointed by the largest regional banks that own a majority of shares of the 12 regional Federal Reserve banks, are better for the nation than the decisions of millions of owners of gold coins, who seek their own interests.
This is the argument in favor of a salaried bureaucracy in place of the free market. It assumes the superior wisdom and superior public interest of a committee of academics (Board of Governors) and commercial banking agents (regional Fed bank presidents). The mainstream opponents of a gold standard never put it this way, but this is the inescapable implication of their opposition.
The only exceptions within the anti-gold special-interest group are the Greenbackers. They assume the following, and are willing to say so: The economic outcomes of policy decisions made by a congressional committee are superior for the nation to the decisions of millions of owners of gold coins, who seek their own interests.
But the Greenbackers refuse to admit that there is a second presumption: The decisions of this committee will be faithfully implemented under the authority of the Department of the Treasury, which is under the authority of the president, and whose employees are protected by civil-service rules against being fired.
Ultimately, this debate is between the logic of the free market as a social organization versus the logic of central planning. The battlefield is monetary theory and monetary policy.
The argument, when stripped to its barest essentials, is one of State versus markets — central planning versus individual planning. It is an argument for or against freedom. As Ludwig von Mises stated:
It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.
The modern and oppressive State is against freedom. The argument regarding gold versus fiat money has been settled both theoretically and empirically. For the theoretical, see numerous treatments of the issue by Mises, Hayek, Rothbard and others. For the empirics, see such failed experiments as East Germany, the Soviet Union, North Korea and others. Nevertheless, the State desires power and neither argument nor facts will stop them from this pursuit.
The good fight fought against fiat currency is a long and lonely one. This fight will not be won by intellectual persuasion, but will be determined by the brute forces of the markets the State believes it can control. A currency collapse is likely inevitable. That will expose the fraud and corruption of the current fiat currency regime. Even when that occurs, the elites will do whatever they can to avoid an honest money system.
Most of us don’t have the time to become Don Quixotes on this issue. Regardless, from a practical standpoint one should recognize what is happening and where it leads. We may be powerless to change the outcome, but we are not powerless regarding how the outcome will affect us. As the late economist Frank Knight wisely observed:
We have to adapt and overcome, that’s all we can do.
… more professional investors, especially in this quarter, have invested even more in the [Precious Metals] ETFs: up 56 percent in this quarter. If you look year-to-date, compared with last year, ETFs are up 134 percent compared with the nine months to the end of September 2011 — 189 tons versus 80 tons.
This is an indication that professional investors are concerned about the financial system. They’re expecting that balloon in central banks’ balance sheets to occur into 2013. They’re concerned about the fiscal cliff and the debt ceiling in the U.S. And therefore, they’re using the ETFs as the way of increasing their allocation to gold.
These actions are an attempt to “adapt and overcome” in advance of the fiat currency crisis that is ahead.