Why Does Virginia Want a Back-Up Gold Currency?

It's not everyday that a U.S. state starts planning for the demise of the dollar. Today is apparently that day for Virginia.

Despite sub-2 percent inflation right now, state lawmakers are worried the Federal Reserve's expanding balance sheet could eventually stoke Weimar-style hyperinflation and want to prepare for the day after such Mad Max monetary mayhem. As Ylan Mui of the Washington Post reports, Virginia's House of Delegates recently passed a bill calling on the state to spend $17,440 studying the feasibility of returning to a metallic money standard should Fed policies or cyberattacks obliterate the value of the dollar.

In other words, they want to bring back everybody's least favorite barbarous relic: the gold standard. Now, as far as zombie ideas go, the gold standard is, well, the gold standard. It's not even a solution in search of a problem. It's a problem in search of an even bigger problem. Pegging the money supply to the supply of gold prevents central banks from creating money at will -- that's what its advocates like -- but printing-press-fueled inflation isn't our problem nowadays; the opposite, actually. Inflexibly tying credit to the amount of shiny rocks we can dig up risks leaving us with too little credit when we can't find enough shiny rocks -- and hence turning recessions into depressions due to too-tight money, like in the 1930s.

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