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  • In a Focus on Gold, History Repeats Itself



    By FLOYD NORRIS
    Published: February 2, 2012

    As it was in 1980, could it be again in 2012?

    The 1980 presidential election was fought by a Democratic incumbent weakened by a poor economy amid worries that the United States had lost its ability to compete in the world. Gold prices had risen to unprecedented levels as the election approached, and the Republican nominee hinted he might propose a return to a gold standard.

    That Republican, Ronald Reagan, won the election and soon appointed a commission to study the role of gold in monetary systems. To gold bugs, it appeared to be the best chance in decades to move the country toward gold and away from what they like to call “fiat money,” a currency anchored by nothing more than government dictates.

    Last month, Newt Gingrich, seeking to widen his support in the days leading up to the South Carolina primary, promised that he would appoint a new gold commission. “Part of our approach ought to be to re-establish something Ronald Reagan did in 1981 and that is to have a commission on gold to look at the whole concept of how do we get back to hard money,” he said in a speech.

    “Hard money is a discipline,” he added. “It is very important for us to understand in finance that the entire contraption that has been built up over the last thirty or forty years has so much paper in it, so much debt, so much leverage, that we probably have a fifteen- or twenty-year period of working our way out of it. And yet, the alternative is to get sicker and sicker and sicker.”

    That call may have helped him in South Carolina, where he scored a victory over Mitt Romney, but it did not do much for him in Florida, where he finished a distant second in this week’s primary. His strategy now is to present himself as the only conservative with a chance, and thereby persuade supporters of Rick Santorum and Ron Paul to unite behind him. Support for a gold standard is a major part of Mr. Paul’s platform.

    Mr. Gingrich, it should be noted, did not promise to support a gold standard, only to appoint a commission. If he is serious about following Mr. Reagan’s precedent, there may be little chance of a move to gold even if Mr. Gingrich does win the Republican nomination and the November election. In office, Mr. Reagan showed no inclination to buck the collected wisdom of most economists, whether Keynesian or monetarist.

    The 1980 Republican platform denounced “the severing of the dollar’s link with real commodities in the 1960s and 1970s,” which it blamed for inflation. “One of the most urgent tasks in the period ahead will be the restoration of a dependable monetary standard,” it added.

    As Anna Schwartz, an economist who served as the gold commission’s staff director, later wrote, that section could be seen as a “veiled reference to a prospective return to a gold standard.”

    Under a gold standard, the dollar would be valued at a certain number of grams of gold, and the government would be ready to buy or sell gold to anyone based on that value.


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