Political Animal

Blog

August 12, 2011 11:25 AM All that glitters is not gold

By Steve Benen

As exchanges from last night’s debate go, this one certainly wasn’t the most important, but it did strike me as vaguely bizarre.

Q: Senator Santorum, I’ve got one for you. You said that you were, quote, the Tea Party before there was a Tea Party. But a top Tea Party goal, particularly in Iowa, is to revert back to the gold standard, something you oppose. How do you consider yourself in line with the Tea Party without agreeing on this major issue?

SANTORUM: Well first off, I didn’t say that; the Washington Post said it. I simply commented on what they said. I don’t take the claim, the Tea Party organization is flat and it should stay that way. It should support ideas not candidates. And people who stand up and say they lead it, well, I think most of the Tea Party people think their leadership is among the people not anybody is a member of congress or anywhere else.

What I’ve said is that I agree with Newt — I think there’s some reforms we can do at the Fed. And I agree we need to audit the Fed. Disagree with most of what Ron Paul said. Just because he’s mostly wrong, doesn’t mean he’s always wrong.

Just so we’re clear, in the 21st century, we have a major-party candidate for the presidency being asked in a nationally-televised debate why he doesn’t support the gold standard.

Worse, when Santorum conceded that he doesn’t support the gold standard, he heard quite a few boos from the audience.

Is it me, or is the fact that this exchange happened at all rather surreal?

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

Post a comment
  • kw on August 12, 2011 11:35 AM:

    Hey, we're still arguing over evolution. Why would the gold standard seem an unlikely topic for discussion?

  • c u n d gulag on August 12, 2011 11:38 AM:

    Gold is sooooooooo yesterday...

    Today, we have a "Platinum Age."

    So, what's the fixation on gold?

  • Frank Smith on August 12, 2011 11:44 AM:

    Of course none of this is treated as surreal by the mainstream media. Just read Mark Halperin slobbering over the secessionist Elmer Gantry in Time.

  • Todd for VT House on August 12, 2011 11:47 AM:

    Let's just hope they don't start re-debating the 3/5s Compromise...

  • stormskies on August 12, 2011 11:48 AM:

    Looking at these people, including the moderators who asked the questions, is like looking at a fucking circus of clowns ...

    And, yet, as Frank Smith just pointed out our corporate media is treating them as something sane and a viable alternative to Obama ... this is beyond surrealistic... it's complete fucking insanity ...

  • davidp on August 12, 2011 11:48 AM:

    American politics have been surreal for quite a long time now, at least since the election of 2000. An important landmark was the first appearance of the Laffer curve. That's when supposedly serious people started believing in fairies.

  • TheGreenMiles on August 12, 2011 11:48 AM:

    Tough times are bull markets for snake oil.

  • tiredofit on August 12, 2011 11:50 AM:

    Not all that glitters is gold. The way you wrote it, gold is not gold.

  • LL on August 12, 2011 11:54 AM:

    'baggers do not understand this issue at all. What they understand is: "gold, good. Paper dollar, bad" More or less, anyway.

    I've come to the tentative conclusion that far-right voters understand virtually nothing about running a modern pluralist state in a complex world. They have a strange, alt-reality perspective that has nothing to do with how things actually work.

    Thing is, if they really were running the country, they would take us down entirely in short order, all the while blaming the Democrats and the commies and the press and the atheists and the brown people and anyone else they could think of. Taking responsibility for the consequences of their ridiculous beliefs is not a strong suit.

  • September on August 12, 2011 12:00 PM:

    I'm against the Gold Standard because I'm a Currency Originalist: one should trade in salt and first born daughters or GTFO!

  • Redshift on August 12, 2011 12:11 PM:

    Pretty much everything that comes from the Paulites is surreal.

  • Redshift on August 12, 2011 12:14 PM:

    Let's just hope they don't start re-debating the 3/5s Compromise...

    Well, Santorum did accuse Obama of wanting to take us back to 1775. (In case you're wondering, no, it didn't make any sense, and the context didn't make any difference.)

  • hells littlest angel on August 12, 2011 12:15 PM:

    In 2000, Paul Krugman said:

    "If a presidential candidate were to declare that the earth is flat, you would be sure to see a news analysis under the headline 'Shape of the Planet: Both Sides Have a Point.'"

    Back then, that made me laugh. Today, not so much.

  • Zorro on August 12, 2011 12:20 PM:

    Rick Santorum is now too liberal to win the GOP Presidential primary. Unbelievable.

    -Z

  • TCinLA on August 12, 2011 12:24 PM:

    Why is it the people who stay in Nowheresville (like Iowa) are always morons?

    I mean, did that audience have a collective single-digit positive-number IQ????

  • 2Manchu on August 12, 2011 12:34 PM:

    Didn't Obama win Iowa?

    Doesn't sound like they're all morons.

  • hells littlest angel on August 12, 2011 12:34 PM:

    TCinLA: indeed, that crowd was so dumb, I kept thinking they were from South Carolina.

  • Kathryn on August 12, 2011 12:50 PM:

    Rick Santorum is deeply weird, the comment about 1775 makes no sense, none. What does "I don't take the claim, the tea party is flat and it should stay that way" mean? Believe it was Lawrence O'Donnell who showed him in a grocery store holding up a napkin saying it was a napkin, it wasn't a paper towel and somehow relating that to a marriage between a man and a woman, deeply weird. If he weren't so evil, I'd pity him.

  • coralwisp on August 12, 2011 12:52 PM:

    I loved Santorum's response to the abortion issue. He points out that the rapist is not murdered so why should the fetus be? Well...Rick....you're right....we should murder the rapists !!! But that is not his position. The man gets off but the woman must bear the burden. What an ass.

  • Rick B on August 12, 2011 1:17 PM:

    The quotation from William Jennings Bryan is really important here. "Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold." This is all about Wall Street Lenders protecting their interest rates while letting small businesses (in 1894 largely small farmers) go bankrupt because of the bad loans they cannot repay.

    Today the gold standard would destroy anyone who is underwater on their home. Of course, the Fed's avoidance of inflation is having the same effect.

    People today do not realize that the most important class warfare happening in the US and in Europe is between the lending class (banks demanding austerity) and borrowers (people who want jobs.) The gold standard would still be favorable to the banks which are screwing the rest of us.

    [The lending class is allied to but not the same has the big business employer class which hates unions.]

  • charles on August 12, 2011 1:18 PM:

    How does Santorum feel about "free silver?"

  • james on August 12, 2011 1:29 PM:

    Rick Santorum is, put politely, inarticulate. Put less politely, he is incoherent. While I cannot believe the question was even asked, I cannot decipher is response to mean anything about virtually anything. Mostly it was a shot at "Tea Party leadership," whatever that means. From the response, I do not know his position on the gold standard.

    Might the question have been asked because gold investment companies advertise on Fox News?

  • lsjogren on August 12, 2011 3:37 PM:


    Gold standard, how primitive.

    Obviously, modern economics allows us to print fiat currency in unlimited quantities without causing inflation.

    Perpetual motion machines are deemed to be charlatanism in science, but in economics they are the foundation of our fiscal and monetary policies.

  • paul on August 12, 2011 3:42 PM:

    Hate to tell you this folks, pure fiat money is only 40 years old...almost to the day as I write this. It is an experiment, one that judging from the loss of value of the dollar in that timeframe is spiraling 'round the toilet bowl right about now.

    I don't know if a straight 'gold' standard is desirable replacement, but there must be some hard constraints - physical if nothing else - on the D.C.-NYC nexus controlling the current fiat regime. For collectively, they are destroying our money between them.

  • steve on August 12, 2011 7:44 PM:

    "Obviously, modern economics allows us to print fiat currency in unlimited quantities without causing inflation."

    Nobody's arguing this, so arguing against it suggests you have reading comprehension problems.

  • Doug on August 12, 2011 10:57 PM:

    Isjogren, you may want to read about the inflation in Spain in the 16th century. Or in Rome in the 3rd century. Both states were on the gold standard at those times. The Byzantine Empire had a similar problem in the 6th century, but THAT was a silver-based inflation.
    Having a gold-backed printed currency doesn't prevent inflation either - one can always change the ratio of bills to gold. In 1933 gold sold for $35 an ounce. That meant the Federal government could print 35 dollar bills for each ounce of gold it held. If it wished to print more dollar bills there were three options:
    - the Federal government could puchase more gold (I have NO idea what with),
    - the Federal government could change the number of dollars it printed for each ounce of gold; ie, devaluation aka inflation, or
    - the Federal government could go off the gold standard and print as much money as it thought the economy could safely handle without setting off an inflationary spiral.
    The Federal government went with the last option and, except for 1946-47 and the late 1970s inflation hasn't been a problem.
    Even though there are those who pretend it is...

  • Jack on August 12, 2011 11:20 PM:

    @ Doug
    "If it wished to print more dollar bills there were three options:"

    Why would the federal government need to increase the money supply?

    The bottom line is that, over time, innovation should allow you to buy the same goods at lower price. Conversely, you should be able to buy better goods for the same price. That is the definition of "improved standards of living" or "a more wealthy nation"

    What is really happening is that the federal gov't is stealing your wealth over time (through a devalued dollar) to fund the grand plans of politicians and you don't even realize it.

  • paul on August 13, 2011 12:53 AM:

    The sovereign will always crave natural inflation, hence money by fiat, for deflation is the friend of the saver, but inflation the friend of the debtor...

    And we all know which side the sovereign - all who with such power have had - trend through history; to oblivion of money via compounding interest, and defrauding their creditors generation later with printing...

  • Anonymous on August 14, 2011 9:22 AM:

    With the gold standard, government cannot print money to finance deficit spending, it is forced to raise taxes for revenue. You're knee-jerk reaction against gold is natural among those who have no understanding what money is, how it has developed and how gold and silver have served as medium(s) of exchange for centuries.

    Of course defenders of the welfare state/centrally planned economy hate a gold standard--it is a check on the inflationary process from which politicians steal the purchasing power of average americans to finance more and bigger and costlier government.

    Are you completely ignorant of basic economics, or just the issue of money?

  • FRP on August 14, 2011 10:39 AM:

    Anonymous wrote :
    With the gold standard, government cannot print money to finance deficit spending, it is forced to raise taxes for revenue. You're knee-jerk reaction against gold is natural among those who have no understanding what money is, how it has developed and how gold and silver have served as medium(s) of exchange for centuries.
    -------------------------------------------
    Wow , do your anger issues keep you as far away from social circumstances as monetary knowledge ?
    -------------------------------------------
    Anonymous continues :
    Of course defenders of the welfare state/centrally planned economy hate a gold standard--it is a check on the inflationary process from which politicians steal the purchasing power of average americans (sic) to finance more and bigger and costlier government.
    ------------------------------------------
    Redux ! Wow Wee !
    ------------------------------------------
    Anonymous continues :
    Are you completely ignorant of basic economics, or just the issue of money?
    Anonymous finis , RIP ...
    ------------------------------------------
    The unkindest cut , wow .
    Projection ! Its what little c conservatives are having for everything intimate and personal now being broadcast publicly . They , the little c's , have no qualms about the public projection of remotest discomfort with personal rot as long as it is qualified as "Liberal" all is safe from gag or quarantine "reflex" ...

    After years of molly coddling from responsible sources of natural correction , i.e. , a free press , the infantile exaggeration from our dear friends from the right wing is now a twiddle brittle pornographic . Today the yecchy yakk centers of nausea , tomorrow the brains , brains , brains .

  • lsjogren on August 14, 2011 11:33 AM:

    "Having a gold-backed printed currency doesn't prevent inflation either - one can always change the ratio of bills to gold."


    A so-called "gold standard" in which the exchange rate between government currency and gold is allowed to float is not a gold standard. The whole idea of a gold standard (or any standard in which the currency is backed by hard assets), is that there is a fixed exchange rate and thus the creators of government currency are unable to expand the money supply arbitrarily.

    By your broad definition of a "gold standard", the US is under a gold standard right now, since citizens are allowed to own gold and the exchange rate between the dollar and gold is allowed to float.

    Your statement is more correctly stated as: "Inflation is compatible with a gold standard, because if the gold standard is eliminated then inflation can occur". Which is true, and also utterly pointless.

    You might have made a little better argument if you had said a gold standard can't prevent inflation because government can always choose to back out of the gold standard. As some advocates of Austrian economics have contended, all fiat money systems have eventually failed. But advocates of establishment economics have pointed out that all hard currency standards such as the gold standard have likewise failed.


    One other argument that could be made against a gold standard or other hard currency standard is that despite having a fiat currency system, the US and Europe have been able to achieve prosperity. Sound money advocates claim that there actually was a viable hard currency standard until Nixon voided Bretton Woods in I believe it was 1971, and after that we began our long march toward a death spiral of debt.

    But I don't rule out that our current economic system, which is based on inflation, may be a viable one. It probably, however, is destined to produce booms and busts. As we live beyond our means on borrowed money, debt builds up. Sooner or later that process will have to stop because creditors will come to realize that money they lend out will be paid back in relatively worthless paper money. At that point, central banks could keep the Ponzi scheme going by printing more paper money. High inflation will rear its ugly head. What do we do then? Either Draconian austerity measures or else Weimar-style money-printing leading to the second coming of Adolf Hitler.

    This is why I believe our inflation-based economic system leaves much to be desired. I believe some sort of sound money system would be better. I don't care if it's a gold standard or what, but something that doesn't foster economic bulimia like our current system does.

  • Anonymous on August 14, 2011 11:39 AM:


    To give the Austrians credit, however:

    1). A fiat money system always eventually fails because it is a system that is inherently unstable.

    2). Sound money systems always eventually fail because they are invariably subverted and eventually discarded.


    So, one could say the sound money system is superior in the sense that it is not inherently flawed as is the fiat money system.

    The fact that sound money systems always eventually fail is akin to the fact that honest governments always eventually fail. But that is not an argument to not bother trying to have an honest government.

  • wellbasically on August 14, 2011 11:51 PM:

    "By your broad definition of a "gold standard", the US is under a gold standard right now, since citizens are allowed to own gold and the exchange rate between the dollar and gold is allowed to float."

    Sorry this is not true. Gains in gold are taxed at the capital gains rate. In addition, you are not allowed to use gold as a currency to buy or sell large items, or really any items.

  • MERLIN on August 15, 2011 3:25 PM:

    No, Steve, discussing the possibility of a gold standard is not surreal. Some of the most sophisticated, non-ideological economists have made serious studies of the gold standard versus the current system. In that light, the gold standard looks pretty good. Of course, it can't compare to the idealized version of the Federal Reserve System, which was supposed to eliminate recessions and inflation. But taking a look at just the Greenspan and Bernanke tenures at the Fed, the real operation of the Fed has been a major contributor to bubbles and economic dislocation. So, yes, we need a better monetary system. The idea that people would not be discussing the workings of the gold standard in comparison to the current system is rather surreal.

  • WhoIsTheFool on August 15, 2011 11:35 PM:

    The fiat money regime has destroyed 98% of the value of the dollar in less than a century, and has for the last decade, deeper recessions and shallower recoveries. It is taking more and more dollars of money printing and debt to generate every dollar of GDP growth. So why is it crazy to ask if maybe, just maybe, something is wrong with this system?

  •  
  •  
  •