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Money = gold or silver?

I'm going to just throw this out for discussion rather than as an actual proposal:

The present constitution includes among the enumerated powers to Congress the authority to mint coins and regulate their value. All monetary policy authority pretty much is derived from that clause.

Obviously, the founders had gold or silver in mind at the time, and that remained the money of the US up until the Federal Reserve Act was established, with a few exceptions along the way (e.g., Lincoln's "Greenbacks"). FDR took us off the gold standard, and eventually even the silver certificates were replaced with "Federal Reserve Notes", i.e., fiat money.

Many economists will argue that a gold, silver, or bimetalic standard is not feasible or desirable in a modern economy. Others argue that a metalic standard is not only possible but desirable, mainly as an independent, physical restraint upon the inevitable temptation of politicians to inflate the money supply and debase the value of money.

I'm of two minds on this. On the one hand, I dread inflation, especially hyperinflation, and fear that we are in danger of it unless some independent controls are placed on the federal government. The discipline of a metalic standard could accomplish this. On the other hand, I fear that attempting a metalic standard will end up causing more problems than it solves.

This leads me to wonder: are a metalic standard or a wide open uncontrolled fiat money system our only options? Might there be something that avoids the problems of a metalic system, yet still subjects the money supply to tight control out of the hands of the politicans?

Those countries that seem to do the best job of keeping inflation under control have very independent central banks that operate under a clear mandate to preserve the value of the (fiat) currency. Switzerland is the model that particularly comes to mind. If we were to come closer to the Swiss model, what would we have to do?

1) Increase the independence of the Federal Reserve System. I'm not keen on the Chair or any of the governors being appointed by the President and confirmed by the Senate. But I'm not keen on the election of governors (for both the central bank and the 12 regional banks) being in the hands of the private sector banks, either. Would the direct election of the 12 governors by the voters, by region, with long and staggered terms, (and with the chair either elected by the governors or rotating) provide enough independence?

stefan_stackhouse, 18.06.2012, 19:11
Idea status: under consideration

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