One of the most vocal advocates of returning to the gold standard is Jeff Bell, the policy director of American Principles in Action, which recently sponsored a forum for Republican candidates in South Carolina.
Mr. Bell argues that gold should be the final currency of the world, instead of the dollar. He thinks any American should be able to go to a bank and convert his or her money into a gold ingot or two. The actual amount a person would receive would depend on the market. “Say you have thirty months of market activity, then the secretary of the Treasury locks in a value for the price of gold based on that activity,” he says. “That would give you a good approximation of how many dollars would be represented by an ounce of gold.”
Advocates for gold argue that policymakers can’t be trusted to run the economy. In theory, using gold limits the amount of money the Federal Reserve can print, which might prevent inflation from decimating the value of the currency.
“The market would control the money supply, not some PhD from MIT,” says Bell.
Of course there was a time when the US government did offer its citizens a chance to exchange their cash for gold or silver. Between 1816 to 1914, a gold standard existed with most nations linked to a specific gold price. As World War I began, the system ended.
After World War II, world leaders adopted a modified form of the gold standard, known as the Bretton Woods Agreement. Each nation’s currency was linked to the US dollar (fixed exchange rates) which was in turn linked to gold priced at $35 an ounce. But Americans no longer could exchange money for gold. The linkage was reserved for central banks.
That system was in place until Mr. Nixon closed the gold window that Sunday night in 1971, interrupting the adventures of the Cartwright family on the Ponderosa ranch.
Mainstream economists argue going back to convertibility of the greenback into gold or silver is a bad idea.