It is rarely considered by conventional academic opinion that the long-term stability of a gold-based currency in a free market brings about a major mutation in human behavior. In a free market, shorn of subsidies for consumption, every able-bodied person and firm must first make a supply to the market before making a demand. This social and economic principle effectively alters human conduct. It encourages production before consumption, balances supply and demand, rules out inflation, maintains balanced international trade, and upholds the framework for stable money. In a free market, grounded by a convertible currency, new money and credit may be prudently issued only against new production or additional supply for the market. Moreover, worldwide hoarding, caused by government overissue of paper money, comes to an end. May I emphasize that hoarded trillions of inflation hedges—in the form of antiques, art, commodities, diamonds, jewelry, and innumerable other vehicles mobilized as hedges to cope with depreciating currencies—will give way to new liquidity, then to investment, as the reality of an authentic and trustworthy monetary standard takes hold in a free market worthy of the name.
By means of currencies mutually convertible to gold, people and firms worldwide will have regained the confidence to exchange inflation hedges for the convenience of convertible currencies with which to invest profitably in productive facilities and the jobs to work them.
The irony of the gold standard and currency convertibility is that it ends speculation in gold. It restores the incentive to use and to hold convertible paper currency and other forms of cash balances. Currency convertibility limits not only the extent of inflation, but it also limits its twin sibling, deflation. Thus can the road to rising real wages and growing employment be rebuilt on the durable foundation of a free monetary order—that is, money free from government manipulation.