Two years ago Steve Forbes, two-time candidate for nomination for president by the Republican Party and editor of Forbes magazine, predicted “a return to the gold standard by the United States within five years ... [because it would] help the nation solve a variety of economic, fiscal and monetary ills.” It’s now two years into his prediction and articles explaining how such a return would work, and why, are beginning to appear in the media.
Particularly insightful is one written by Nathan Lewis, a monetary historian and author of Gold: The Once and Future Money, that appears, not surprisingly, in Forbes, in its first issue of 2013. Lewis’ message is simple: The United States was on a gold standard from 1870 to 1914, and it can be reestablished without difficulty once again. He writes, “We don’t have to hypothesize too much about what a new world gold standard system could look like. We can just look at what has already been done.”
He says that the system would look pretty much the same as it does now. Paper dollars could be redeemed for gold coins but most people probably wouldn't — it’s just too much bother. All that holders of paper money would like to know is that they could, at any time, receive an equivalent unchanging number of gold coins for a certain amount of paper money. That confidence would remove a major obstacle facing the economy at the present time: uncertainty about what those dollars might be worth in the future.
With the United States leading the way, the country’s major trading partners would be forced to back up their own currencies with gold as well, which would lead to another “river of capital” flowing into the country just as in the latter half of the 19th century. Wrote Lewis:
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