The Theory of Money and Credit - Ludwig von Mises [198]
First of all there is need to remember that the gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion—policemen, customs guards, penal courts, prisons, in some countries even executioners—had to be put into action in order to destroy the gold standard. Solemn pledges were broken, retroactive laws were promulgated, provisions of constitutions and bills of rights were openly defied. And hosts of servile writers praised what the governments had done and hailed the dawn of the fiat-money millennium.
The most remarkable thing about this allegedly new monetary policy, however, is its complete failure. True, it substituted fiat money in the domestic markets for sound money and favored the material interests of some individuals and groups of individuals at the expense of others. It furthermore contributed considerably to the disintegration of the international division of labor. But it did not succeed in eliminating gold from its position as the international or world standard. If you glance at the financial page of any newspaper you discover at once that gold is still the world's money and not the variegated products of the divers government printing offices. These scraps of paper are the more appreciated the more stable their price is in terms of an ounce of gold. Whoever today dares to hint at the possibility that nations may return to a domestic gold standard is cried down as a lunatic. This terrorism may still go on for some time. But the position of gold as the world's standard is impregnable. The policy of "going off the gold standard" did not relieve a country's monetary authorities from the necessity of taking into account the monetary unit's price in terms of gold.
What those authors who speak about the rules of the gold-standard game have in mind is not clear. Of course, it is obvious that the gold standard cannot function satisfactorily if to buy or to sell or to hold gold is illegal, and hosts of judges, constables, and informers are busily enforcing the law. But the gold standard is not a game; it is a market phenomenon and as such a social institution. Its preservation does not depend on the observation of some specific rules. It requires nothing else than that the government abstain from deliberately sabotaging it. To refer to this condition as a rule of an alleged game is no more reasonable than to declare that the pres ervation of Paul's life depends on compliance with the rules of the Paul's-life game because Paul must die if somebody stabs him to death.
What all the enemies of the gold standard spurn as its main vice is precisely the same thing that in the eyes of the advocates of the gold standard is its main virtue, namely, its incompatibility with a policy of credit expansion. The nucleus of all the effusions of the antigold authors and politicians is the expansionist fallacy.
The expansionist doctrine does not realize that interest, that is, the discount of future goods as against present goods, is an originary category of human valuation, actual in any kind of human action and independent of any social institutions. The expansionists do not grasp the fact that there never were and there never can be human beings who attach to an apple available in a year or in a hundred years the same value they attach to an apple available now. In their opinion interest is an impediment to the expansion of production and consequently to human welfare that unjustified institutions have created in order to favor the selfish concerns of money lenders. Interest, they say, is the price people must pay for borrowing. Its height therefore depends on the magnitude of the supply of money. If laws did not artificially restrict the creation of additional money, the rate of interest would drop, ultimately even to zero. The "contractionist" pressure would disappear, there would