The rumor is that Republicans, at their upcoming convention, will call for a government commission to study the feasibility of returning to a gold monetary standard. The platform would also call for a policy audit of the Federal Reserve, a proposal that has passed the House but is currently stuck in the Senate (and apparently opposed by the Obama White House).
First let’s recognize that a GOP gold standard plank isn’t all that novel. Republican platforms in the past have often alluded to “a dependable monetary standard,” as both the 1980 and 1984 platforms made some reference to monetary matters. In fact, the 1980 election did result in the creation of a Gold Commission. Cato recently republished the commission’s minority report, The Case for Gold, as a free ebook. So if Republicans want to consider some sort of gold standard, there is already a significant amount written on the topic. Cato also published a paper in 2008 by George Mason University professor Larry White on the economics of the gold standard.
On a broader level, what these platform additions truly represent is a dissatisfaction with the Federal Reserve, and not only its current monetary policies, but also its role in the numerous bailouts of 2008-9 and the extent to which its obsession with deflation contributed to the creation of a massive housing bubble. If Republicans truly want to take on the Fed (something I’m not all that convinced of), then exposing the Fed’s repeated rescues and support of Wall Street would likely be far more effective. I’ve long been puzzled by how President Obama manages to talk tough on Wall Street while he stands next to Tim Geithner. If Mitt Romney wants to distinguish himself from the current president, the best thing he could do is call for Geithner to resign.
Republicans would also be wise to talk about the relationship between inflation and unemployment in the long run, which appears positive, rather than negative as the proponents of more Fed easing would have us believe. The single-minded focus on gold is likely to serve more as a distraction than anything else. I have about as much faith in the federal government picking the correct gold-dollar parity as I do in the Fed picking the correct interest rate. And of course, who is to say that gold is the correct commodity to use in the first place? But then, this concern is less about gold and more about the Fed. And while Republicans have regularly talked tough on the Fed, the truth is that it has usually amounted to little more than talk.