"The really strange thing about all this is that this turn toward hard-money mysticism is taking place even as events have demonstrated that the advantages of not being on a gold standard, of having a fiat currency that can be printed freely in emergencies, are even greater than standard analysis had supposed...
So the GOP has decided that we must reject the evils of fiat money and go for the gold standard at precisely the moment when events have demonstrated that fiat money is a really useful thing and the loss of flexibility that comes from ending fiat currencies can be utterly disastrous. What’s going on?
I think Yglesias has this right: "Commodity-backed money is basically a solution to a non-problem. Or at least it’s not a problem you have if you don’t accept a Randian deeply moralized view of market outcomes. The existence of fiat money is embarrassing to that kind of ideology, so it inspires quests for alternatives to modern central banking even when the alternatives don’t make sense."
In this sense fiat money is like, oh, Social Security. The problem it creates for conservatives is not that it doesn’t work, but that it does — which is a challenge to their philosophy. And so it must die."
http://krugman.blogs.nytimes.com/
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