Blog Post - Views on the Economy and the World

The Gold Standard and Trump

| Oct. 31, 2016
My preceding post, “The Fed and Inequality,” observed that populists have historically favored easy money and low interest rates.  I mentioned William Jennings Bryan’s campaigns for the presidency in the 1890s as well as the supply-siders in the early 1980s who blamed the failure of Reaganomics to produce sufficient growth on Paul Volcker’s efforts to fight inflation with tight monetary policy.

An interesting dimension concerns gold.  Bryan’s proposed reform for allowing easy money was to take the US off of the gold standard, most famously in his 1896 “cross of gold” speech.  He vowed to lead the people as they confronted “the idle holders of idle capital,” declaring “You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.”

In the 1980s, the supply siders’ proposal for easier money was to put the US backonto the gold standard.  Some proponents of this viewpoint included Jack Kemp, Lewis Lehrman, Ron Paul, Alan Reynolds and Jude Wanniski.  The Reaganites’ pressure on the Fed for monetary stimulus is typical of Republican presidents since Richard Nixon.

In this election year Donald Trump, following Ted Cruz and other Republican presidential candidates, has said he too wouldlike to go back to the gold standard.  But when Trump and other Republican politicians express admiration for the gold standard these days, they say they want tougher monetary policy.  It is the opposite position from the 19th century populists and the opposite motivation from the Reaganites.

If inflation were high today and had been low in the 1980s, one could reconcile the support for the gold standard then and now by trying to argue that it would bring more price stability.  But inflation was too high in the 1980s (above 4%) and has been very low recently (below 1%).  I can’t see how to reconcile the Republican positions then and now, other than observing that they seem to seek monetary stimulus when they are in the White House and monetary contraction when they are out of office.

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For Academic Citation: Frankel, Jeffrey.The Gold Standard and Trump.” Views on the Economy and the World, October 31, 2016, https://www.belfercenter.org/node/89750.