Throughout much of history, money has either been a precious commodity (gold or silver) or convertible into a precious commodity. However, in the second half of the twentieth century the link to gold was broken and we now live in a world of fiat money i.e., the paper money printed by government has been declared to be legal tender by mandate or government fiat. Our fiat money system has been responsible for high and volatile inflation and it may even have contributed to the huge and deleterious expansion of credit over the past few decades. As a result, there has been a call from some economists and politicians for commodity money, such as a gold standard, to be reintroduced.
Many economists have major objections to the idea of a gold standard. Larry White has just had a piece published by the Cato Institute where he tackles 13 objections to a gold standard - click here for his paper. What most economists overlook is that Larry and other free bankers don't just want a gold standard, but they also want central banks to be abolished, with private banks being free to issue their own currencies. Indeed, for free bankers, the problems with the gold standard were largely due to the policies of central banks.
