Gold Standard Increases Savings

A gold dollar, reinforced by effective bankruptcy law, sustains economic justice—regulating and disciplining speculative capital, restraining political and banking authorities such that they cannot lawfully depreciate the present value or the long-term purchasing power of dollar wages, savings, pensions, and fixed incomes.  Nor under the sustained, legal restraint of convertibility can governments ignite major, long-run, credit and paper money inflations with their subsequent debt deflations.  Under the gold standard, the penalty of excessive corporate and banking leverage is insolvency and bankruptcy.  As the profits belong to the owners, so should the losses.  Bankruptcy of insolvent firms shields the taxpayer from the burden of government bailouts.  Managers, stockholders, and bond holders must bear the responsibility for insolvency.  In the absence of currency convertibility and bankruptcy, crony capitalism corrupts and perverts free markets.

A stable dollar leads to increased saving not only from income, but also from dishoarding—releasing a vast reservoir of savings previously hoarded in the form of inflation hedges such as commodities, art, farmland and other vehicles—all purchased to protect against the ravages of inflation.  These hoarded savings, imprisoned in hedging vehicles by uncertainty and inflation, are induced out of speculation by currency convertibility to gold.  The savings are then supplied to entrepreneurs and business managers to create new income-generating investment in production facilities, thereby leading to increased employment and productivity.  On the other hand, sustained, government-subsidized consumption—through deficit financing, transfer payments, paper money fiscal and monetary stimulation—leads to disinvestment, debt financing, speculative privilege, and growing inequality of wealth.