President Richard Nixon (R-USA) takes the United States off of the gold standard. In many ways, this is the ultimate triumph of Keynesian economics over reality.
However, despite my preference for Austrian economics, I’m ambivalent where it concerns a return to the gold standard. This may be a battle that has already been lost. By my calculations, the entire amount of gold ever mined amounts to something between $8 trillion and $9 trillion at today’s exchange rates.
If you think a return to the gold standard is likely, buy gold now. $1800 an ounce will seem incredibly cheap. The price could easily triple, and that might be conservative. And know the side effects. Gold is widely used in consumer electronics. Your $200 smartphone might suddenly move out of your price range. Or more likely, gold will be replaced in consumer electronics with cheaper, and lower quality, alternatives. Hooray for lower quality! Sign me up!
When Nixon took us off of the gold standard, he put in place some temporary but rather draconian measures to avoid economic turmoil (see link above). Getting back on the gold standard would require some of these same types of practices or acceptance that the stocks and bonds markets would go crazy for a while, which will likely bring economic growth to a halt.
Still, there’s no doubt that a return to the gold standard would severely limit the power of the Federal Reserve, and in my mind that’s an incredibly good thing. It also makes absurd practices like “quantitative easing” out of the question. That is without doubt a great thing.
And there are quite a few more pros and cons than I’ve gone into in this post. In short, this is a complex issue that deserves more attention than a 30-second sound bite.