One of the most puzzling things about modern gold bugs is the fact that so much of their rhetoric is made out to be populist, with fiat money being a tool benefiting only the rich and well-connected. The way that they view the narrative of American--and indeed global--economic history seems to be one in which the gold standard lay at the heart of America's economic growth in the 19th and 20th centuries. That is, until FDR and his elitist bankster cronies took us off the gold standard in 1933 for their own selfish motives. Here are a few snippets from Ron Paul's own website:
"Who benefits from inflation? Only those who are at the top of the pyramid and receive all that new money directly from the source. As you might have guessed by now, the source is the Federal Reserve."
"If our money were backed by gold and silver, people couldn’t just sit in some fancy building and push a button to create new money."
"As you can see, inflation and fiat money are very seductive and beneficial to those at the top, and very dangerous to everyone else and the nation as a whole."At this point, you might be wondering, "Wasn't FDR utterly despised by most wealthy people?" Well, yes. He was. He once said, "They [the wealthy and well-connected] are unanimous in their hate for me--and I welcome their hatred." It hardly seems sensible, then, to think that he took us off the gold standard to benefit those who hated him the most.
That's precisely why this retelling of history isn't true. Roosevelt took us off the gold standard to help ordinary people--most of whom were mired in debt. To understand how inflation helps debtors, a quick lesson may be in order:
When a central bank creates money, it creates, in effect, inflation. On a gold standard, the ability of a central bank to create money is restrained, so deflation is much more severe during depressions and other shocks to aggregate demand since the central bank can't print money to counteract falls in prices.
Imagine that you've just taken out a mortgage on your house for $100,000 and that your annual income is $50,000. Now imagine that, for the sake of argument, prices for whatever reason double in the economy--an exaggerated inflation, but just go with it for now. Your income would double to $100,000, BUT your mortgage would stay the same because it's locked in contractually. So now it takes you one year of income to pay it off instead of two. This is what inflation does to those with debts--it helps them out at the expense of creditors.
To someone with $10,000 in savings, a doubling of prices means that your savings--which would stay the same in dollars--could buy half as much stuff. If we reversed the situation to be deflation instead of inflation, those with debts would suffer, since their salaries would fall, while their mortgages would stay fixed, making it more difficult to pay down debts. Those with savings would benefit, since prices fell by half. Simply put, inflation hurts savers and helps debtors, and vice versa for deflation.
And that's part of the reason why FDR took us off the gold standard. It wasn't because he wanted to hand out free money to rich people. It was because there were a lot more people with debt that exceeded their savings than the other way around during the Great Depression, and fighting deflation would help them (and the broader economy) out--and most people agree that it did.
It was also why William Jennings Bryan gave his famed "Cross of Gold" speech in 1896, declaring that "you shall not crucify mankind upon a cross of gold." Indeed, the populist movement in the late 19th century--which was basically made up of a bunch of indebted farmers--was largely focused on bimetallism, or the idea that gold AND silver should both be considered money. In effect, they wanted to do the modern equivalent of printing more money! The populists of the 19th century were no more in favor of a gold standard than I am! Ironically enough for the gold bugs' historical narrative, the big banks actually fought the populists and bimetallism tooth and nail and ultimately prevailed.The gold standard was kept in place, and a lot of people lost out because of it. Hardly what you'd call populist.
All of this brings me back to my initial point about the false populism behind modern gold bug rhetoric. Much has been made during the Great Recession of the consumer debt overhang--simply put, the average American has a lot of debt on their books, mostly from mortgages. Excessive consumer debt is a bad thing, to be sure, but returning to a gold standard today would be no more populist and no more helpful to the average American than it was during the 1890s or the 1930s.