The gold standard was, and could be again, the stable American and international monetary institution – encouraging financial order, growth, and prosperity.
The abandonment of the gold standard during the history of the 20th century resulted in manipulated currencies leading to a century of economic and civil strife, within nations, and to terrible wars between the great powers. The 20th century experience of monetary disorder, wrought by floating exchange rates and Central Bank discretion, is the empirical witness to the indispensable necessity of convertibility of the major national currencies to gold – a restoration only plausible under American leadership.
The gold standard is real money, acceptable from time immemorial, ruling out substantial and sustained deflation and inflation. The gold standard leads at home to peaceful cooperation and trade among diverse citizens. The international gold standard is the optimum non-national world currency which leads to cooperation among different sovereign countries and distinct cultures. Convertible currencies are the least imperfect vehicles inducing cooperation of competing interests, because, despite all national differences, each sovereign national currency is convertible to a neutral, common world currency – a specified weight unit of gold. Thus all currencies convertible to gold are mutually convertible to each other. Such an international monetary standard is beyond the control of any one country.
Because of its stability, neutrality, and simple adjustment mechanisms, internally and externally, the gold standard tends to reduce, at home and abroad, currency wars, inflation and deflation, conflict and violence. These disturbances arise from politically manipulated, national, floating currencies. The insidious monetary process of political manipulation of the value of national currencies destabilizes the peace of the social order; it increases strife among citizens; it causes intense divisions and political partisanships. But the ensuing bubbles of inflation and the busts of deflation can be coped with by nimble speculators, even as they impoverish the middle class and all those on fixed incomes. Throughout history currency wars lead to irreconcilable class rivalries at home, often born of undervalued currencies, competitive devaluations and national tariffs, joined to trade-blocking quotas.
If we truly wish to rule out systemic financial disorder and currency wars, and their consequences, the great powers must rule out official national reserve currencies; and then embrace the international gold standard as the official standard monetary unit and the sole reserve currency of an integrated and open world trading system.