Just now on CNBC, host Larry Kudlow asked: Why can’t we just replace The Federal Reserve with an ounce of gold?
Given the political climate, and the spiralling dollar, gold-buggery has suddenly become very trendy in elite media circles. Charles Kadlec at WSJ had a column last week that in the battle between Gold and the Federal Reserve, the record is clear, gold wins.
But how should we think about Kudlow’s stance?
Remember, back in September, 2008, Kudlow was a clear advocate of the bailouts, and the Fed’s action to sop up billions in MBS and bail out AIG was a crucial aspect of that equation. He was like a lot of other mainstream pro-business pundits who considered the bailouts a necessary evil that should almost never be used, except in gave circumstances like this one.
Quite frankly, this level of support would have been impossible under a gold standard, where the currency was totally fixed and the Fed didn’t have the ability to print more.
Now, you could argue that it would have been better if the Fed hadn’t had that ability. That’s fine. But it’s absurd now to be advocating a gold standard now, when it would have thwarted what you saw was a crucial action to save the economy.