1. Some of the concerns against the gold standard are valid of course, but all of them rest on two spurious premises: that in the first place, gold is in a bubble and that "...the problem is that all these theories hold true in a recession, but they will fall flat once the global economy moves from chaos back to economic prosperity"; even assuming gold is in a bubble, I just want to ask- with the recent QE2 move by Bernanke, do you suppose we are going to return to a time of true economic prosperity as evinced by real growth or are we barrelling through another bubble and another worse decline? The second option I think would be the ideal result (among the worst) of this absurd gamble- that the money stays in the domestic market and some sort of bubble is created. Well and good, jobs and growth for another few years. But what happens if what occurs is a flight towards more profitable markets and a liquidity trap is created? By the same token, to use the author's words- "... the problem is that all these theories hold true in a prosperity".

2. "High gold prices are a symptom of -- not a solution to -- a problem: lost confidence in the Federal Reserve's and other central banks' abilities to create jobs and maintain economic stability. That mistrust has allowed a gold bubble to develop." True with regards to the first part, but the professor is confusing correlation with causation- that mistrust, while a symptom, did not cause people to flock to gold (or a bubble for that matter); what caused the gold rush- pardon the pun- was the reckless monetary policy of the Fed that allowed for excess liquidity, resulting in of course, the devaluation of what people had in their pockets.

3. Lastly, I do not support the gold standard per se- I'd prefer currencies to be tied to a basket of commodities. At any rate, rightly or wrongly, whether or not, the current price of gold is a bubble, the flock towards gold was a result of people wanting to attach value to something that couldn't be arbitrarily defined by an institution. The author formulates some valid points but the piece turns out to be a bit of a straw man and misses the point- people used to have a dollar to buy a Coke, now they need two. A lot of the same people want something else to buy that Coke.

Gold would be in a bubble except for one little thing - Peak Oil. Consider for a moment how high oil prices remain despite poor economic conditions. What do you think would happen if the economy took off and created a lot of extra demand? Why is Ben Bernanke still paying interest on excess reserves to the banks despite his full knowledge that this is restraining the banks from lending? Ben is hitting the accelerator (QE2) and the brakes (interest on reserves) at the same time. Once you realize that economic growth is globally capped by oil supplies, a lot of things start to make sense.

Now consider what would happen if OPEC started pricing oil in terms of gold bullion?

Hi Mark,

I have to wonder - were you a QE2 doubter? A year ago, which did you think the Fed would do first, ease or tighten?

If you thought tighten (Bernanke's laughable WaPo exit strategy speech), you do not adequately understand the fundamentals of this situation.

The most common error among gold bears that I have observed is a focus on deflation. They keep saying, "the fed is more worried about deflation than inflation". Of course they are, lol. It is that "worry" (aka concern about bank profitability and viability) that will feed inflation.

The Fed will seize on any sign of deflation to justify further greasing. Who gets paid? The banks of course, the same ones who own the Fed.

The only curb on Fed printing will be a political sea-change, when American's finally wise up. Until then, it's Bernanke's misinterpretation of Friedman, helicopters, bags of money, and bonuses out the a$$.

This piece sure hit on why it would not be wise to invest in Gold presently, as it most certainly is in a bubble due to collapse. But it fails to address the ideas of a "Gold Standard." The idea of a Gold Standard does not tie value to the gold but rather makes the gold serve as a means of conveying value. Money is worthless, but what it represents has value. The idea of a Gold Standard is that we would have one currency for all such that none could manipulate their respective currency at the pain of another currency. This article completely failed to address this fact and that notion and therefore failed to tell why a Gold Standard would not work. What it did was point to the idea of gold as a commodity being a pure choice to seek out presently, though certainly electronics industries will still want it for its low resistance to current or high conductance value and defense will want it for its EM shielding. A Gold Standard would work well in the world assuming two other factors: 1. Truly, completely Free Trade, and 2. Open borders with free migration available to and from anywhere in the world with no hassle. With these, then goods could be produced where best able and folks to produce them could get around to make them. Without these, then the one currency idea, or Gold Standard, would fail as certain markets would heat up or cool with folks unable to adapt. That is why we need multiple currencies today, in order to adapt to changing economic conditions in which political conditions prevent us from naturally adjusting ourselves. Paul Krugman explains this rather well in his discussion of why the dollar worked within the United States, which is a diverse geographic and economic area, but why Ron Paul is wrong to seek a Gold Standard, in his book The Return of Depression Economics. New question: Would people tolerate free trade, open borders, and a single currency? I think not as that sounds suspiciously like a world government though I think it would not be that bad a thing to have.

One formulation:

Gold is the money of kings.
Silver is the money of gentlemen.
Barter is the money of peasants.
But debt is the money of slaves.