Why We Need the Gold Standard

Everybody knows we need sound money; but what exactly is sound money? A good way to answer this question is to consult the works of the two greatest economists of the twentieth century, Ludwig von Mises and Murray N. Rothbard. I am proud of the fact that Mises’s widow, the unforgettable Margit von Mises, warmly approved of the Mises Institute when I founded it in 1982, and proud that Murray was our Academic Vice-President and spoke at our conferences and events until his death in 1995.

Both of these great men made crystal clear that they supported a monetary standard based on the precious metals, preferably gold.

First, let’s look at what Mises said. In his masterwork , he first pointed out that the use of gold and silver as money was not what he called ‘a praxeological fact.’ In other words, you couldn’t deduce just by thinking about it that these metals would be chosen as money: “Men have chosen the precious metals gold and silver for the money service on account of their mineralogical, physical, and chemical features. The use of money in a market economy is a praxeologically necessary fact. That gold–and not something else–is used as money is merely a historical fact and as such cannot be conceived by catallactics [the study of economic exchange]. In monetary history too, as in all other branches of history, one must resort to historical understanding. If one takes pleasure in calling the gold standard a ‘barbarous relic,’ one cannot object to the application of the same term to every historically determined institution. Then the fact that the British speak English–and not Danish, German, or French–is a barbarous relic too, and every Briton who opposes the substitution of Esperanto for English is no less dogmatic and orthodox than those who do not wax rapturous about the plans for a managed currency.”