The September issue of The New Internationalist is in shops now. The theme is all about the rise of gold on both the right and left of the political spectrum. It includes a piece by me on the economics of the whole thing entitled ‘Bunker Economics’. So, if you’re bored, don’t have access to the internet and see a hard copy of the magazine for sale somewhere feel free to pick it up.
I noticed the goldbug trend way back when the crisis started and I’ve been on the front-lines of fighting that nonsense since it started. What I found so fascinating was that many people on the political left were picking up the narrative. But anyone who knows the history and the economics of the gold standard knows that it is an inherently right-wing device. The main rationale for the gold standard is to prevent governments from being able to run large deficits and debt. Thus, with the gold standard much of the counter-cyclical aspect of government spending is automatically reigned in.
If the gold standard were reenacted today most countries around the world would have to engage in extreme austerity of the type we see in Greece. What I found so fascinating about the rise of the goldbug narrative on the left was that the same people who supported it as a means to supposedly stop ‘private banks creating money’ were completely shocked and appalled by what was happening in Greece. Yet they were implicitly calling for it to be applied elsewhere when they demanded a return to the gold standard.
The most interesting outlet for this contradictory narrative was the television station Russia Today. Russia Today generally takes a very left-wing perspective on most issues. But from time to time you will see them drag on some right-wing conspiracy nut. Still, the main editorial stance is generally left-wing. But after the crisis the goldbugs completely took over the station.
What was so interesting about this to me was that it became clear that at the time the left had no coherent economic narrative that it could push. Thankfully this has largely changed due to pioneering blogs (like Naked Capitalism, New Economic Perspectives and The Financial Times Alphaville, especially the work of Izzy Kaminska), David Graeber’s bestselling book Debt: The First 5,000 Years (which I think was the big game-changer on the left and which launched after the interview I conducted with Graeber back in the summer of 2011) and the collapse of the gold market (which I called just before it happened).
I think that the latest issue of The New Internationalist is really the final nail in the coffin of this nonsense. But a few people will likely hold out. That is unfortunate. But many in the financial markets think that gold has a long way to go yet before it reaches a bottom. Perhaps what an appeal to Reason cannot chip away at, a very large hit to their portfolio can.