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A senior Republican policy adviser writes that the GOP considered and rejected a return to a gold standard over three decades ago.
In light of the Republican Party’s recent decision to include a possible return to a metallic basis for the US currency in its policy platform, former Reagan and George H.W. Bush policy adviser Bruce Bartlett writes in the New York Times that this is not the first time in recent history that the Grand Old Party has put the gold standard back on the table.
According to Bartlett the 1980 Republican Party platform also sounded out the possibility of the return to a gold peg less than a decade after Nixon’s decision to float the US dollar in 1971.
Senator Jesse Helmes of North Carolina and long-time goldbug Ron Paul, then the representative for Texas, simultaneously proposed the establishment of a commission to study “the role of gold in domestic and international monetary systems.”
Reagan, who came into the office by the time of the commission’s establishment, was largely sympathetic to the gold standard, as were key economic advisers Arthur Laffer and Lewis Lerhman. Rowland Evans and Robert Novak also reported in 1981 that the Reagan administration “is filled with closet gold bugs.”
Despite these promising signs for a return to the gold standard at the outset of the Reagan presidency, the March 1982 conclusion of the Gold Commission established at Ron Paul’s behest was that “a return to the gold standard is not desirable.”
A month prior to this the Reagan administration had already indicated its unwillingness to return to the gold standard in the Economic Report of the President, which asserted that pegging the dollar to gold led to greater economic instability, higher unemployment and more protracted recessions.
The kernel of its argument was that gold standards achieved stable purchasing power in the long-run at the expense of short-term stability, with inflations counterbalanced by crushing deflations.
Bartlett outlines other reasons for the general consensus amongst mainstream economists that a return to the gold standard is undesirable, one of the most striking being the increase in government regulation of monetary affairs that a gold standard necessitates due to fluctuations in the price of gold and the actions of speculators.
