Paul gives new life to an old issue: gold standard

AUSTIN, Texas — Facing double-digit inflation in 1981, Congress created a commission to consider a role for gold in U.S. monetary policy. The 17-member panel rejected the idea of returning America to the gold standard — except for two dissenting members.

One was a little-known congressman from Texas named Ron Paul.

Today, Paul's surprisingly strong race for the Republican presidential nomination is drawing new attention to a notion that long has been a cherished cause for a small group of conservatives but is considered a relic of history by mainstream economists and politicians.

Paul and his supporters would like to set a firm value for the U.S. dollar, much like when it was pegged to a specific amount of gold. They say prices would be stable and inflation controlled because the government couldn't print more money than it had gold to back it up. This approach, Paul maintains, would address many of the economy's problems.

Other Republican candidates haven't joined him, though, and most experts dismiss the scheme as completely unfeasible in the modern global economy. For one thing, it would require most other countries to change their monetary systems. It would also preclude the ways that nations now manage the ups and downs of their economic cycles.

"Is it feasible to go back to something called 'the gold standard'? The answer is no," said Edwin Truman, senior fellow at the Peterson Institute for International Economics, who has written about gold and monetary policy. "The United States does not have the capacity to run such a system in the world today."

Still, talk about a gold standard, which the United States used in its early years but largely abandoned in 1933, shows how economic anxiety has fed a growing appeal for unusual remedies.

"People sense that there's something deeply wrong with the economy, so I think economic radicalism is much more popular than it has been in the past," said Jeffrey Bell, a GOP political consultant who helped Ronald Reagan record a campaign ad endorsing the gold standard in 1980. It never aired.

The Federal Reserve, America's central bank, sets interest rates to keep the economy, inflation and employment on a healthy track. Truman said the Fed has been reformed frequently and a key way to overhaul it today would be to restrict the assets it buys and sells.