The Heritage Foundation's Project 2025 has gotten lots of attention lately, though it's mostly just standard movement conservative wet dreams. One interesting piece is its usual right-wing hatred of the Federal Reserve:
A core problem with government control of monetary policy is its exposure to two unavoidable political pressures: pressure to print money to subsidize government deficits and pressure to print money to boost the economy artificially until the next election. Because both will always exist with self-interested politicians, the only permanent remedy is to take the monetary steering wheel out of the Federal Reserve’s hands and return it to the people. This could be done by abolishing the federal role in money altogether....
In the absence of the Fed, Project 2025 makes two recommendations, both of which are essentially returns to the gold standard. But let's take a look at US monetary history with and without active Fed management:
I don't know about you, but given the massive boom/bust cycles of 1870-1940, I think I prefer the modern era of active Fed control. It's hard to understand how anyone can look at this very basic chart and conclude that weak or nonexistent central control of money is a cure for everything that ails us.
And this doesn't even account for the fact that gold is no longer stable in value. If, for example, the dollar were defined as one-thousandth of an ounce of gold, here's what inflation looks like over the past four decades:
Which world do you prefer? Over the past 40 years, the CPI has gone up 204%. Gold has gone up about 450%. It's not exactly a stable source to base a currency on.
This is hardly the most important part of Project 2025, but it's an issue of longtime puzzlement for me. Why are conservatives so suspicious of the Fed? And why are they such gold bugs? Gold has never prevented inflation, and in recent decades its value has gyrated wildly. Meanwhile, during the postwar era the Fed has been responsible for an outstanding record of steady growth, reasonable inflation, and very few serious recessions. Even accounting for its mistakes, what's not to like?
History and simplicity.
Historically the alternative to gold wasn't the federal reserve, but super loose money. Free silver, etc. So the business class in those days favored hard money which benefitted creditors and feared loosening the money supply.
The other thing is a lot of conservatives are simpletons (some liberals are too, but more conservatives than liberals are). They spout things like "if my family can balance the budget the country can" and "slash the bureaucracy 30% and nothing bad will happen"
Goldbuggery is the ultimate simpleton belief. Fiat money is, after all, backed by nothing. Gold is valuable. Fiat money relies on the subjective intentions of Fed personnel; gold is objective. Under fiat money prices slowly go up; under gold, they think, your money is "backed" and retains its value.
This is all bats of course, but the gold standard appeals to simpletons.
Adam Smith did a dissertation on commerce and markets in Wealth of Nations. It's a bit of a slog to read but his quite well reasoned chapter on why fiat money is absolutely necessary to smooth commercial operations was very good.
Once I got familiar with the archaic English he used, I started seeing flashes of Monty Python skits to come.
One way in which it's all bats is that there is not nearly enough gold in the world to actually back the dollars (let alone other currencies) out there.
So, either there is grinding deflation for decades to get the volume/value of dollars in line with the actual quantity of gold out there, or we simply say that some trivially small amount of gold is "worth" a dollar (much like we say some trivially small value of of ink, paper, and cotton is "worth" a dollar . . .), in which case we are fiat currencying all over again.
THIS. I've tracked the gold market for decades as I dabbled in making jewelry, I used to read up on the state of the market stuff and it was all those nutter gold bugs in the comment sections, figures because I'm old enough to remember the gold craze of the 1970s to early 1980s. Seeing that informed to never actually invest in gold but just enjoy it, god is gold beautiful to work with and wear.
My favorites are the ones suspicious of fiat currency but backing bitcoin.
Because right-wingers are stupid.
Why on earth would we tie our economy to the number of rocks Russians or South Africans can dig out of the ground?
Question:
Why did you pick real GDP to chart? How about nominal GDP - which is a better target.
And this statement "Because both will always exist with self-interested politicians, the only permanent remedy is to take the monetary steering wheel out of the Federal Reserve’s hands and return it to the people" is COMPLETLY nuts. The Fed is independent. If anything, it is too conservative around election time. And - "return it to the people" means what exactly? It was NEVER in the hands of the people.
The real question is: Which people?
"Me. Give all the power to me." say a whole bunch of the goldbugs.
They seem to me to be another bunch of people who took Econ 101, and learned about the power of free markets in the first half of the course, and then dropped out before learning about market failures (monopolies, externalatites and free riders, imbalance of information) in the second half of the course.
And - "return it to the people" means what exactly? It was NEVER in the hands of the people.
Company script! Company script for everybody! And bitcoin.
Historically, gold has favored bankers and the other rich people over farmers and working people. Going on the gold standard would also make it easier/more necessary to cut government spending whenever things get tight. Making the rich richer while government shrinks away to nothing is long a conservative goal.
The gold standard also appeals to ignorant people who think they are smart - fiat money sounds like something that would be extremely risky, while gold sounds like it should be very safe. Who wouldn't want wealth you can hold in your hands, instead of something that requires you to trust the government?!
At this point there are so many conservatives who hold at least some gold, switching to the gold standard sounds like something that would immediately make them rich. At least richer than their non-gold-bug liberal neighbors.
I also think the fact that we are absolutely never going to go on the gold standard again is something that makes this appealing. Gold buggery is a huge differentiator between libs and conservatives, and it doesn't carry the taint of racism, so you can play it up as much as you want without turning anyone off. People either love gold a lot or have no clue what the fuss is about. There's basically no one who is going to say "I was all for the Republican party, but then they started talking about gold, and I realized I had to vote for the Democrats."
Sometimes going all-in on an incredibly bad idea only has upsides. I think this is one of those cases...as long as they never put enough crazy believers into government to actually make it happen.
The Fed is something they can complain about that sounds plausible to the low-information personality, the only kind of person they ever need to seem plausible to.
I guess I am real ignorant on the gold standard thing, but perhaps one can explain to me how do we now get back onto the gold standard? Money Supply is just under $21T and the US has about $0.58T in gold reserves (largest in the world).
Why are you asking practical questions?
Oh, picky, picky, picky... 🙂
Your question prompted me to go look at the source at the link Kevin provided (an experience I don't wish to repeat soon). The author tells us that the transition would be "very straightforward," and while he notes the problem you pointed out, he says it can be solved easily if we just do things correctly. I know I'm reassured.
If we invest that .58 Trillion in alchemists, I'm sure they'll find a way!
According to the USGS, the *entire world* has a total of about 60,000 tons of gold. Altogether, that's worth not quite $4T.
I'm curious whether any gold bugs address that issue, but not curious enough to read their manifestos.
"Supply is just under $21T and the US has about $0.58T in gold reserves"
Now imagine trying to finance the Federal Government just based on gold reserves.
The gold standard doesn't quite work the way some people think. There is something called fractional reserve banking. In the early 1930s, when US was still on the gold standard, one $25K brick of gold allowed the Federal Reserve to extend $71K of credit to banks which could then extend $525K of credit to borrowers. The value of gold may be fixed in terms of dollars, but the money supply would depend on the reserve ratios. The difference now is that the Federal Reserve doesn't have to play with reserve ratios. It can just allow banks to extend more credit or require them to extend less.
The effective ratio in 1932 was 22, so $0.58T would be about $12.7T, a bit over half of the actual $21T.
There is no reason to attribute the greater recent stability to the Fed. There was a huge change in attitude toward regulating banking and financial markets at the time of the Depression. In the US markets were regulated in various ways and many dangerous things outlawed. Deposit insurance greatly reduced bank failures. But beginning in the 60's regulations began to be relaxed, partly because it was assumed that the Fed could always fix things with magical monetary policy. Alan Greenspan especially was an advocate of deregulation and he was instrumental in the particular failures that led to the Great Recession. It's true that the Fed rescued the big banks by throwing money at them, which the Fed did not do in 1929. This was what the Fed was originally set up to do by the Bunch of Big Bankers who invented it. In 2008 the government could have taken over the banks, a process which was actually set up in the New Deal and which was advocated by many leading economists, but that would have put some of the current big bankers out of business, which the Fed directors could not allow.
The Great Recession actually showed how deregulation had failed and there was some reregulation. But the banking and finance industries are always finding new ways to get around regulations and they have many supporters in Congress. Maybe next time the Fed won't even be able to rescue anybody. Most Republicans voted against TARP in 2008 so there is no telling what might happen.
Of course going back onto the gold standard, or whatever crackpot scheme Republicans are advocating (Trump has some good ones) is not going to take the place of sensible restraints on banking and finance, which should be by legislation and federal agencies, not the Fed.
Why are conservatives such damn gold bugs?
Because if you have gold you could sell it, and then you will have --money.
Or not. How many really rich people have actual metallic gold in their basement vaults? How many have it tucked away in tax havens?
Now, in an economic meltdown how likely is it that they will find it easy to get that gold OUT of the vaults in the tax havens?
I had a conversation a good 40 years ago with a gold bug whose gold was somewhere in New York State to hedge against a complete collapse of our fiat money - but he had the certificates! I asked him how likely was it that in a collapse like he was envisioning, the gold would still be there when he fought through chaos to reach the vaults. He paled a bit and didn't talk to me for a while.
Interestingly enough I remembered that conversation when I heard of the Mt. Gox bitcoin debacle, and again with SBF's offsetting bitcoin issues. Only difference to me is the bitcoin can disappear without needing an armored truck.
Preppers who stockpile gold at least have something to the idea - assuming it doesn't get stolen, gold will have at least some value in a collapsed, chaotic society. But bitcoin will be worth zero in a collapsed society, because it requires the Internet to function and the Internet relies on infrastructure and services that will go down and stay down if society collapses. No Internet = no access to your crypto = no use and no value for crypto.
An article I read years ago suggested stockpiling pre-1964 dimes, because they would be a much more useful denomination.
Even if you had a brick of gold, it would be like having a $100,000 bill.
this thing you're worried about, project 2024, is not a big deal to me, kevin drum.
Then you’re just not paying attention.
"is not a big deal to me"
You? Who are you?
Lactating Al Gore?
Personally I'm more worried about Project 2025.
Perhaps Project 2025 is "just" the ongoing "conservatives' wet dream" but I think it's sheer folly to be sanguine about it. The Supreme Court has taken the guardrails off Trump, the Heritage Foundation has been recruiting to fill the civil service with same types of people Jared tasked with buying covid masks and ventilators, and the Democrats believe they're going to lose the whole ballgame in November.
The Republicans are deadly serious about fulfilling this God-awful mission and are going to help Trump fulfill his making this a country that 2/3 of the people won't want to live in for the next 50 years.
You are an optimist.
Trump will make the US an awful place for at least 90% of the population, intentionally. He thinks suppressing the population is the ultimate achievement, and that what he will do.
Project 2025 is part off schieving this.
We should spin up AuCoin. Crypto all the way, baby!
Sorry if this seems obvious, but I have spent too much time lurking on gold bug message boards. It has warped my perspective.
Gold is in the intersection of moltiple elements of conservative fantasy, from George Will's admission of conservatism being a return to society as configured in 1900, to a borderline Mad Max prepper utopia.
Gold, seen as kryptonite to the Fed - and, by extension, "The Jews," in the form represented in Rothschild conspiracy theories - is more generally a symbol of the pre-Enlightenment, freedom from other people, and opposition to civilization in general, seeing as civilization inevitably contains people who do not look or think like us.
The hub of the wheel is Fed hatred. “The Fed" - the most oft-pronounced syllables in any online conservo-glibertarian discussion of the economy - is both a dog whistle for "da Jews" and an example of bureaucratic policy centralization. It is a successful example at that, which gnaws at the subconscious of conservatives of all stripes.
Most conservatives, if not preppers, harbor at least a fantasy of watching civilization burn from an invulnerable bunker with a good view of the carnage and a generous supply of cold beer. Afterward, when the "strong" - which always means "people just like me, and no others" - emerge from their lairs to create a society just complicated enough to provide the benefits of division of labor without taxes or a legal system, a form of moey suitable for commerce and wealth storage is required. Of course, it must be free of government influence on its value.
Gold does not serve any of the above purposes well, since banknotes and credit evolve in most societies as soon as people can write, and governments always influence its value anyway: Even if no government controls your region, someone else's government can hoard gold or subsidize its mining.
So gold is a fantasy, but it's a symbol of another fantasy, a pre-modern near utopia which conservatives cherish as an ideal.
From John Scalzi (2010):
"I really don’t know what you do about the “taxes are theft” crowd, except possibly enter a gambling pool regarding just how long after their no-tax utopia comes true that their generally white, generally entitled, generally soft and pudgy asses are turned into thin strips of Objectivist Jerky by the sort of pitiless sociopath who is actually prepped and ready to live in the world that logically follows these people’s fondest desires. Sorry, guys. I know you all thought you were going to be one of those paying a nickel for your cigarettes in Galt Gulch. That’ll be a fine last thought for you as the starving remnants of the society of takers closes in with their flensing tools."
Or, in the words of another commenter whose handle I don't recall, "They think that, after the chaos, they'll be the one sitting on the throne made of human skulls, when actually they'll be one of the skulls."
I’ve known for decades that if I were in a Mad Max movie, I would have been thrown from a truck before the credits stopped rolling.
The answer to all of these questions is "Because these are very stupid people, who are easily suckered by right-wing media and con artists".
Occam's political razor.
conservatives just want to blame the government when the economy goes bad
nothing more than that
if the gold standard reduces government influence, that's good
and rich republicans love depressions since it lowers wages and they can buy real assets on the cheap
statistically the vast majority of them will lose their shirts, but they all think they're smarter than the other guys so they'll be among the ubermensch winners
it's all part of the white christian nationalist exceptionalism fantasy
(with guns)
Always there are multiple layers of the game.
To folks with lots of money the volatility is a feature, not a bug. Littlefinger said it best: "Chaos is a ladder" (though he didn't quite make it to the top). The wealthy can usually take advantage of volatility if they're paying attention.
Everyone else is told a story suited to their biases (whether antisemitic, or populist, or just ignorance).
Cryptobros play on the sameemotions and ignorance.
Only $0.58T of gold on hand? Make up the difference with NFTs! Easy peasy.
Lets have Wildcat Banking!!!!
https://en.wikipedia.org/wiki/Wildcat_banking
We already have cryptocurrency.
I think conservatives like gold because they dream of cornering the market on it and bringing the government to them begging, like so many J.P. Morgans.
Incidentally, if you haven't read When Washington Shut Down Wall Street, by Wm Silber, I highly recommend it. I personally like it better when the bankers need Washington more than Washington needs them.
As a former Ron Paul supporter let me explain the real reason why those on the Right love gold.
Because you cannot have the kind of government this country has now without a Federal bank be able to create wealth instantaneously as we do now. You can't do that with gold because gold has a fixed value and as a commodity that value is based on how much of it there is. You might as well create bonds based on the number of cotton bales that are stored at the Port of Charleston, which is what the Confederacy tried to do.
Now one might say "Well, isn't that special you have a printing press that can create so much wealth!" But it's not just about printing money because if that were true we would already be like Argentina or Nigeria, where politicians really do control the money supply, than Fed bankers who are completely anal about inflation. They know the power they have and do everything they can to control it (too much so in my opinion) because no one is going to buy T-Bills backed by worthless dollars.
At some point It dawned upon me that many on the Right believe the only real way to reduce the size of government is to force it spend money just based on gold. In their minds when Roosevelt took the U.S off the gold standard in 1933 it gave us the New Deal and after Nixon did the same in 1971, gov't spending just took off. I would love to see how Republicans in government whose states live off of Federal expenditures, would function, when the spigot, especially when it comes to military facilities, is turned off because the Feds couldn't pay for it because it literally has no money to do. Paul, at least, was consistent in views because you never saw him demand Federal funds for his Galveston-based district nor was their a naval or air base with thousands of workers and military personnel he had to look after. So he was lucky in that regard (a lot of Texas Congressmen are not). The bottom line his views were considered fringe, even on the right, for many years before those same people latched onto Trump because Trump captured the base of the party away from the neocons and the Bush family. That's why you see all this crazy shit.
But bottom line is, whether Trump believes in gold or not is immaterial, because what he does believe is the Fed should not be independent of politics and if he takes power again it won't be. It will do exactly what he wants it to do and once he has that power, well, once conservatives once believed to "fear God and Inflation." They've already abandoned God for Trump and pretty soon they'll learn to love inflation.
When Hoover was President and the stock market stumbled and revealed how shaky the house of cards that was the financial system was, and then banks started failing, Hoover kept the US on the gold standard and did not nearly enough to stabilize the US economy. Gold Buggers resent FDR for relaxing the gold standard and stating to lessen the Great Depression. There was another event later in FDR's presidency that caused the Federal Government to spend a lot of money, too. Maybe they resent the influence the US had on ending WWII.
Speaking of Paul, it was Nixon's decision to go off gold that sparked him into a political career eventually. Nixon realized that the U.S could not pay for its government with gold backing because so many nations were redeeming their gold reserves for U.S. dollars that the country "wouldn't have a dollar left" if the process continued. The amount of gold reserves the U.S. had at the time shrunk to its lowest level meaning only printing press money could help float the U.S. Government and thus the economy setting off even more inflation than there was at the time (six percent). Nixon not only prevented this by going off gold but he also instituted wage and price controls as well. This is what he said at the time:
The third indispensable element in building the new prosperity is closely related to creating new jobs and halting inflation. We must protect the position of the American dollar as a pillar of monetary stability around the world. In the past 7 years, there has been an average of one international monetary crisis every year… I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States. Now, what is this action—which is very technical—what does it mean for you? Let me lay to rest the bugaboo of what is called devaluation. If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. The effect of this action, in other words, will be to stabilize the dollar."
Don't laugh about Crypto because a lot of Crypto people are backing Trump and Trump, who was once a critic, is now backing them. Imagine the money supply based on Crypto. Well you won't have to if Trump is elected.
I think it has more to do with colonialism. Rich people and rich nations get to control other nations and stop them from getting uppity and all.
Fortunately for us, they are right about one thing: politicians are self-interested, and as such will never vote to restore an economic system that guarantees they will get dis-elected as soon as the inevitable financial panic arrives.
For the very wealthy, an economic collapse is an opportunity for them to really put the screws to the less well off. The last thing they need is a central authority acting to relieve the stress of a collapse.