NEW YORK (
TheStreet) -- If you want an example of just how insane the Republican primary race has become, you need look no further than the rallying cry that went up as
Ron Paul addressed his followers in Nevada Tuesday night: "End the Fed! End the Fed!" Catchphrases of the
Federal Reserve-hating, gold-standard-return-advocating extremists, such as "fiat money," are growing commonplace on the campaign trail.
That's right. Gold bugs, the lunatic fringe of investing and economics, have crept into national politics. What's next? Flat-earth advocates? Area 51 conspiracy theorists?
Sure,
Mitt Romney, who doesn't subscribe to any of that stuff, is looking stronger than ever after his Florida triumph. We all know, unless we're on his bandwagon, that Ron Paul hasn't an iceberg's chance in hell of winning the G.O.P. nomination. But
Newt Gingrich is still in the race, and, as I'll be describing in a moment, he's almost as much of a dedicated gold-standard guy as Paul. Both Gingrich and Paul are pledging to remain in the race until the convention, and Paul may very well continue through November with a third-party bid.
What that means is that the most extremist vision of monetary policy, a subject so obscure that most voters don't even know it exists, is looming as one of the right's principal priorities in the 2012 elections. And though Romney hasn't climbed on the bandwagon, don't count him out. His record of flip-flopping and pandering to the right makes that a distinct policy.
All this is terrible news for America, because returning to the
gold standard is one of the most idiotic ideas to come to the fore in the most intellectually obtuse presidential campaign since the era of the No Nothings. As
Paul Krugman pointed out in a December column, the premise behind the idea is just flat-out wrong.
According to the Austrian economic dogma that Paul embraces, we should be in the midst of runaway inflation at this very moment because of all that "fiat money" out there. But we aren't. However, Paul and his supporters have never let the truth get in the way of a good argument, so they are continuing to push the idea that the dollar should be backed by gold. "And what will happen if that doctrine actually ends up being put into action?" Krugman asked. "Great Depression, here we come."
Even Alan Greenspan, the Ayn Rand devotee who advocated a return to the gold standard in one of his essays for an Ayn Rand journal in the early 1960s, knew better than to push the idea when he became Federal Reserve chairman. He advocated a variety of other Randian ideas, notably deregulation, but not that one. It was just too far out.
No matter. Goofiness is "in" nowadays. Returning to the gold standard would have the effect of crippling the federal government. That's OK with Paul, whose aim is to do just that. So you can't swing a cat at a Paul rally without colliding with someone holding a banner saying "End the Fed" or making reference to "fiat money," as gold bugs refer to paper money. A return to the gold standard long has been a priority of the stridently libertarian Paul, who has been talking about that for decades and
wrote a book on the subject, but it's also been a longtime talking point for Newt Gingrich.
It's been largely overlooked amid the general background noise, but Gingrich has been flirting with the gold standard for at least two decades -- far longer than is generally acknowledged. It certainly far predates his plan to
convene a "gold commission" to "look at the whole concept of how do we get back to hard money." I used a proprietary database to comb back through Gingrich's past pontifications on the subject when he was in Congress, and I found that he was promoting the idea on the House floor as far back as 1985. In November of that year, Gingrich inserted in the Congressional Record a constituent's statement, which he had read at a town hall meeting, calling for return to the gold standard. Gingrich returned to the subject in May 1990, when he posted a
Wall Street Journal article advocating the gold standard.
Now, if that's all he did I wouldn't have considered it to be very noteworthy. It would have been just a fling with the idea, not a full-fledged romance, and his advocacy of a "gold commission" would seem like little more than pandering to the Paul constituency. But the sincerity of his views on the subject became plain in a floor speech that he gave on May 4, 1989. A California Republican named
William E. Dannemeyer, an ardent advocate of the gold standard, had advocated issuance of bonds backed by gold to reduce the budget deficit.
Gingrich had some qualms about that, but said that "the basic underlying premise of what the gentleman from California Mr. Dannemeyer is doing is intellectually sound and is worth being looked at." He went on to give a ringing endorsement of issuing billions of dollars in gold-backed bonds, effectively reviving the gold standard.
He pointed out that for "200 years almost, from 1789 to 1933, that was the only way, except for the Civil War, we ever had any kind of bonds issued. Starting in 1933 we gradually gave up on that. The result has been inflation which has weakened the interest in savings, it has weakened America as a country, and it has put a greater and greater debt burden on people because they pay extraordinary interest rates. Only in wartime, prior to the modern era, only in wartime would anyone ever have considered 8, or 9, or 10 percent interest rates."
It's a speech that could have been made by Paul. As for Dannemeyer, he quit Congress a few years later, and has mainly become known for his conspiracy theories and for
comparing homosexuals to Nazis. Thankfully, that idea hasn't gone very far. But the gold standard that he pushed is going mainstream.
The ball is now in Mitt Romney's court. His hold on the nomination is far from secure. His right flank is open to assault. He's caved on pretty much every aspect of the right's agenda, pulling U-turns on everything from health care to abortion. Genuflecting to the gold standard would be a low-cost way of weakening both Paul and Gingrich simultaneously. After all, it's not as if opposition to the gold standard has much of a constituency, while the gold standard does.
Holding out further will require some integrity on Romney's part. So don't count on him holding out. And even if he does, expect more rhetoric on that front to befoul the landscape through November.
Gary Weiss's forthcoming book, AYN RAND NATION: The Hidden Struggle for America's Soul, will be published by St. Martin's Press on February 28, 2012.
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