In his blog post "I love Goooooooooooold," Brian Glover discusses a law passed in Utah concerning the use of gold and silver as legal currency. The post lays out details of the new law according to an ABC News article cited in the blog, however the explanation in the blog covers the federal use of the gold standard, not the new Utah law. It states that the Federal Reserve would be required to redeem dollars for a fixed amount of gold, and that the printing of money would have to be weighed against the value of gold, which would be true if the federal government adopted the gold standard, but not under the provisions of the Utah state law. The law does recognize gold and silver coins as legal tender, but they can only be used at their face value. According to the Wall Street Journal, a $50 dollar coin has a market value of $1,400, so the law really has no practical impact in that capacity. The law serves three primary functions: 1) it is a symbolic gesture against the Fed and their money-printing practices; 2) it legally classifies gold and silver as currency so that transactions involving gold and silver are no longer subject to Utah capital gains taxes; 3) it requires state officials to look into the use of an alternative system of legal tender. Articles outlining these functions can be found here and here.
As for the blog post itself, I found the writing style to be very engaging and witty, and a pleasure to read. The use of anecdote was good, and effective in illustrating the public's lack of familiarity with the issue. The author's position and conclusions were clear and assertive, and in line with the information provided.
Having said all that, I respectfully and strongly disagree with the notion that a return to the gold standard would be a good thing. On the contrary, it would be absolutely disastrous.
Proponents of the gold standard claim that the Fed's over-printing of cash is causing rampant inflation. This assertion is false. We are in the midst of a recession, so consumers do not have enough money at their disposal to create demand and drive up prices. As of March, the core inflation rate was a meager 1.2%, a very low figure by historical standards. The headline inflation rate was normal, at 2.7%, even after the impact of rising food and oil prices. Any arguments based on the problem of inflation are simply not rooted in reality.
The value placed on gold as a resource is a relic of civilizations dating back thousands of years. Gold has little intrinsic value; we cannot eat gold, our cars aren't fueled by gold, and our homes are not made of gold or heated by it. Why should the value of all goods be based on such an arbitrarily important commodity? Furthermore, the gold standard was a major cause of the Great Depression. It forced the government to raise interest rates (a definite no-no during a recession) in order to prevent widespread trading in of dollars for gold, which would have caused U.S. gold reserves to run out. With the current trade deficit, foreign countries are amassing dollars. If they were able to redeem them for gold, and did so, the U.S.'s gold supply would be depleted, and the value of our gold-backed currency would plummet. The gold standard also limited the government's ability to use monetary policy to combat the Great Depression, until 1933, when the federal government started printing money without gold-backing and, not coincidentally, the nation began to recover from the depression. If we return to the gold standard, our ability as a nation to respond to economic crises will be severely disabled.
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