I have simply never heard an advocacy of the gold standard to mean, "I wish to abolish the US dollar". I definitely don't think anybody used the term in any other way besides to mean, "improve the current government-sponsored system". It seems that if anybody wanted to use the term in this way, they would at least qualify their remarks as to disambiguate themselves from the normally accepted definition. But I've never heard that. The "Gold Standard" means putting gold behind the US dollar. I can't imagine it being used any other way but I have heard that "objection" before so I was careful to define the term in the first sentence of my reasoning above. Yes, I know. I am saying that such a thing is highly impractical, and the sneaky way this reinforces statism is not worth the trade-off in an environment that, while undesirable, is not a dire emergency. I won't weigh in on fractional reserve banking--I'm not sure what it has to do with the debate. As to whether a government would try to prevent fraud, I would think that would be any proper government's primary charter. Now, should be the government be in the business of insuring citizens in the event of a crime? I don't think so--we have insurance companies for that.
Prolog I have been an Objectivist for a very long time, although I have not been any sort of "activist" since I was much younger. I recently embarked on some "market research" to discover the origins of the recent run-up in the price of gold. I always knew that the Objectivist community has definite opinions on this, and in looking to that community I might find the origins of the "emotional driver" (using that term in the narrow context of investing) of the recent demand. In discussing this online in a decidedly more salty setting, my discussion moved from simply talking about inflation and the like, to a deeper conversation about the Gold Standard in general. I think what I discovered is very interesting, so I thought it might be interesting to dip my hand back into activism, at least for a moment, to share this--and see whether this is an important advance, or whether I'm simply wrong about my conclusion, or whether I just re-invented the wheel. My Conclusion About the Gold Standard I define the "Gold Standard" here as the general idea of moving the US dollar to a system wherein it is backed by gold, or potentially some other mix of commodities, as determined by the government. The Gold Standard is immoral. Advocating it is not only immoral, but impractical in the USA today from an activist standpoint. Objectivists should not advocate the Gold Standard any more than they should advocate increased spending for public schools. The insidious way in which the Gold Standard muddies the concept of true liberty should make it a mortal enemy of Objectivists. The logical foundation of the Gold Standard is government control over the currency businesses and individuals use to trade. A proper government has no moral right to meddle in the area of trade. Nobody has a right to shove any currency, backed by anything down my throat. The Gold Standard presupposes the opposite. It is said that every government program starts with the "best intentions". While I wouldn't say "every program" it's fair to say that many are started by smart, well-meaning people who think they are doing the most scientifically intelligent thing at the time. Clearly the foundation of this--that you have a right to impose your conclusions on others--is immoral. More subtle--and important to reiterate here--is that these people are bad for business. No matter how "perfect" something seems in the present, there is simply no way of knowing what creative entrepreneurs will think of in the future. No matter how practical anything in the realm of business might look in the present, it's bound to be reversed later and if it's enforced as a matter of law, it's bound to restrain trade in unnatural ways. Matters of business are not like those of philosophy, they are not axiomatic and unchanging. Thus the only possible rationale for Objectivists to advocate the Gold Standard is on "temporary practical grounds". As a stop-gap measure: that perhaps we should advocate something that we know is ultimately immoral and incorrect because this will "push things in the right direction". To be clear, in narrow cases, I am all for that, and most decidedly live in the "real world" in this regard. But the Gold Standard falls down by this measure for two inter-connected reasons. First, the "house is not on fire". There is no "emergency" with respect to our situation with the US dollar. It is not in immediate danger of being significantly devalued, and even it were, the current legal situation in the US makes this situation non-lethal: we are all currently free to protect ourselves from any marginal issues with our currency, such as buying and using other currencies, and making hedging investments. As an instrument of day-to-day trade, price inflation is simply a non-issue. Further, the political climate in Washington is presently not in a state that should alarm anybody on this particular issue. The US has seen nearly 25 years of relative stability in its currency (again, in the context of it being viable as an instrument of day-to-day trade), and the current shift in Washington is decidedly away the factors that would lead to 1970s style inflation. There are many cans of gas in the living room, and books of matches on the coffee table, but the house is decidedly not on fire. We are not in a dire emergency with respect to our situation with the US dollar. Second, as a policy move, this is not an easy one. An actual shift to the Gold Standard would be extremely disruptive to world-wide trade if it were done all at once, and it would be extremely difficult to engineer a long-term, less disruptive path. None of the advocates of the Gold Standard that I have seen have written anything along the lines of a paper titled, "Here's How the US Can Painlessly Move to the Gold Standard". My impression is that these advocates actually don't care about such practical details. This is not to say that advocates of philosophical theory should always be concerned with practical implementations--there's work two do in both areas--but in this case, the only moral foundation of the Gold Standard is it's current, here-and-now practical implementation within the current laws of the USA, the current political climate in Washington and one's assessment of the current appetite to make a change like this. But the advocates of the Gold Standard that I have read have not concerned themselves with anything "current". They are "idealists" (as I would consider myself for instance) advocating an "ideal". There's nothing wrong with advocating an ideal as apart from current practical realities. Advocating a temporary stop-gap as an ideal, however, is a perversion. The Objectivist Advocacy of the Gold Standard The Gold Standard, while not formally in Ayn Rand own words, is closely associated with the Objectivist movement. It has its place in official lexicon of Objectivism. I would submit that the origins of this association--kicked-off perhaps by none other than the famous Alan Greenspan--were wrong. That Greenspan, and those around him (including Ayn Rand), incorrectly applied the premises of the proper role of government. If my thesis here is correct, then the Gold Standard should be stricken from the Lexicon (or better yet, its definition should be changed to a refutation) and Objectivists should no longer consider works on the Gold Standard "friendly" to the cause. Further, this particular issue is not merely bad like other issues that are simple falsehoods: it is insidious. It has tricked a lot of people, including Ayn Rand it seems, into accepting the premises of the statists. And minimally, it's an issue that is fraught with complicated technical objections (some of which are very valid) and creates a distraction that absorbs valuable time and burns valuable credibility in the marketplace of ideas. On weighing in on the subject, the Objectivist stance should be, "The Gold Standard implies forced government ownership of the task of currency creation and maintenance, and as such is a violation of individual rights. A proper government has no business meddling in the area of trade, the US dollar should be abolished, and replaced with an open market of currencies that consumes are free to choose on their own. The US government itself should choose currency products to do its business in the same way it chooses the myriad of other private products today.". Hopefully this will end all talk of the "gold standard" and put Objectivism on a firmer footing.