Douglas Carswell's Blog

Monopoly money won't last forever

William Rees-Mogg has an interesting piece in today's Times (behind the pay wall). He points out how the gold standard once "provided a discipline" and "gave money its sense of reality".

What I found striking about the article is less what Rees-Mogg wrote, but the hostile reaction to it by a number of pundits.

Rees-Mogg does not call for a return to the gold standard - "gold is gone and it cannot be replaced". What Rees-Mogg instead suggests is that our post-Bretton Woods fiat currency system might not be all it is cracked up to be. It might - whisper it softly - have something to do with our ongoing financial difficulties.

"Crackpot" declared one. "Serious economists" disagree, another informed me.

Perhaps these are the same "serious economists" who failed to see the financial crisis coming? Five years into this financial crisis, the orthodox diagnosis and remedies have failed to fix things. Perhaps it is time to question the orthodoxy?

Since 1971, when the US broke the link to gold - and we broke the peg to the dollar - we have run a great fiat currency experiment. Perhaps it isn't working?

Maybe it allowed a decades long credit boom? Years of malinvestment, which we mistook for growth? And has ended in the financial mess we are in?

Those living in Britain a hundred years ago would have regarded the classical gold standard as a fixture. Permanent, reliable, a certainty. Within a few years it had gone.

What I find truly "crackpot" is the lazy assumption that our post-Bretton Woods system of monopoly money is necessarily here to stay.

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