“History is a teacher nobody listens to.” — Otto von Habsburg.
In his book “Honest Money,” John Tomlinson describes how inflation gradually causes turbulence and then chaos. He likens the monetary system to another important system of measurement — time. He asks what would happen if Big Ben in London were to become the accepted standard for measuring time and if, because of a mechanical fault, it reduced every minute by one second. The consequences would be devastating. More activities would have to be finished within an ever-shorter period, schedules would gradually collapse, and people would reassess and rearrange their priorities. Everything would speed up and time preferences would increase. According to Tomlinson, a similar scenario is true in the absence of a gold standard….
Howard Buffett once called the gold standard a silent watchdog that prevented unlimited government spending. This seems to be one of its central advantages, and it is probably why a gold standard is not a favorite of politicians. A gold standard is also independent of the various economic convictions of governments. As Ludwig von Mises said, “The importance of the gold currency for internal traffic is that it liberates the creation of the purchasing power of the monetary unit from the fluctuating economic philosophies held dear by changing political majorities and parties. The pegging of the monetary value to the value of gold sets up a dam against any and all efforts of favoring certain social strata at the expense of other strata via monetary measures.”
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