The following editorial appeared recently in the Chicago Tribune:
When the Republican National Convention approved a platform last month that included a plank aimed at reviving the gold standard, it tapped into a rich vein of political convention lore.
It was 116 years ago in Chicago when William Jennings Bryan electrified a crowded hall at the Democratic National Convention with his famous speech denouncing the gold standard. His Republican rival, William McKinley, had pledged to defend a policy that Bryan asserted would hurt the working man.
"You shall not press down upon the brow of labor this crown of thorns," Bryan thundered. "You shall not crucify mankind upon a cross of gold."
Now Republicans want to create a commission to investigate bringing back the "cross of gold." What gives?
Bringing back the gold standard would be impractical, if not impossible. The renewed interest, though, is an understandable reaction to the maddening fiscal conditions of today. The national debt has passed $16 trillion. The Federal Reserve is contemplating a third round of printing money to prop up the flagging economy.
America can't keep borrowing and spending at the rate it's going. Since the U.S. abandoned the last link to a gold standard in 1971, it has become the world's largest debtor nation. It is a healthy practice to explore all options for confronting the ongoing fiscal mess, including a change in the basis for the currency.
The term "gold standard" refers to a monetary system in which the standard unit is based on a specified amount of the precious metal. In the most simple version, the paper dollar could be exchanged for a fixed quantity of gold. If the nation printed more dollars, it would have to maintain the gold to back them up. If it printed too many dollars for the gold it holds in reserve, it could remove the money from circulation or devalue the currency so it is worth a smaller amount of gold. Under a strict application of the gold standard, the U.S. would be unable to maintain its enormous federal deficits year after year.
If the gold standard is starting to sound like a good idea, keep in mind that even many conservatives alarmed by the staggering national debt consider it a recipe for disaster.
From free-market icon Milton Friedman to Federal Reserve Chairman Ben Bernanke, most influential economists blame the gold standard at least in part for the Great Depression. Strict adherence to the rules of the gold game produced a wrongheaded policy response to the 1929 economic shock. A decade of punishing deflation and falling output followed. A return to the gold standard would hearken back to America's darkest economic days.
Besides, nostalgia for the gold standard is misplaced. During its supposed "golden era" preceding World War I, governments closely managed - that is to say, manipulated - its use, as Friedman among others persuasively argued.
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True believers in the gold standard don't care what Friedman or any other erudite expert might have said about it. "Gold bugs," as they're known, never will accept that their treasured idea, rigidly applied, would make a modern economy less stable and its downturns worse.
To the extent that a discussion of the gold standard is code for enforcing fiscal discipline, we see it as a plus. As a political issue, it still has the power to capture the imagination - and maybe votes too. Remember that while Bryan won style points for his eloquence in 1896, McKinley won the election.