(2 of 3)
The commission could not even agree on the conclusions of that report. The members favoring gold said the document supported their views; those opposed said it did no such thing. Lamented Treasury Secretary Donald Regan, who sported a large pair of gold cuff links for the meeting: "We can't agree on the historical facts."
It is widely anticipated that the commission will not recommend a return to the gold standard. Antigold sentiment runs high in the group. What is more likely, predicts Economist Evans, is that the commission will issue a report that will say essentially nothing, and "after that the whole discussion on gold will go away."
Why is the commission deliberating at all? Why has there been such broad interest in a monetary standard that prevailed during the 1800s, when a farm economy ruled the land and the British navy ruled the seas?
Some people are clearly turning to gold out of frustration with recent economic experience. Says Alan Greenspan, the chief economic adviser to President Ford: "There is a growing disillusionment with monetary theory, monetary policy, monetary instruments generally, and people are looking around to see what the alternatives might be. One is gold."
Supply-side theorists argue that a return to gold is an essential precondition for restoring economic stability. Says Economist Arthur Laffer: "We should make money stable by making a dollar bill as good as gold." They maintain that a gold standard would restrict the Federal Reserve's ability to create credit because the long-term growth of money would be determined by increases in the world's stock of gold, which is expanding by only about 2% annually. Thus limiting money growth would create confidence in the value of the dollar, be a blow to inflation expectations and bring down interest rates.
Critics charge that a gold standard would hamstring Government policy and would not solve inflation.
Says Edgar R. Fiedler, chief of economic research for the Conference Board, a New York-based research group:
"Gold is not a magic bullet to eliminate inflation. Inflation is too complex; there is no single answer for controlling it." Opponents further argue that a modern economy has to be able to control the amount of credit that is created. They generally agree that the Federal Reserve and other central banks have let inflation get out of control by permitting money to grow too fast, but they are unwilling to let the amount of credit in the U.S. be determined primarily by the amount of a metal dug out of the ground.
The gold issue is at once simple and boggling in its complexity. Whatever their preference for or aversion to the metal, economists and financial officials agree on one thing: the key to any gold system would be in setting the price for gold. Says Sir Derek Mitchell, a former chief of international finance for the British treasury and now a banker in London: "The biggest problem of all in going back to gold would be fixing the price. Once you've fallen off the high wire, it's not easy to get back on it."