How FDR’s Attack on the Gold Standard Spawned an Age of Inflation
In his great classic, Crisis and Leviathan, Robert Higgs explained how Franklin Roosevelt’s attacks on the gold standard ushered in “the age of inflation” that has now robbed generations of Americans through the inflation tax. The explanation begins with the goofy economic theory that was the basis for the first New Deal: The backwards belief that low prices caused the Great Depression; therefore, if government could force prices up by restricting production the Depression would end. Think about that: The government’s policy was to reduce production, which of course would increase unemployment to supposedly end the extreme unemployment of the Great Depression! The reality was that the Depression caused the lower prices, not the other way around. FDR’s “brain trust” got it all backwards.
Higgs describes what he calls “Undoubtedly the goofiest application of the theory” that had to do with the price of gold. Taking the advice of a Cornell University professor of farm management (not of economics) named George F. Warren, FDR argued in 1933 that by forcing up the dol
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LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.
