A Private-Enterprise Gold Standard?
Why Shouldn't Businesses Quote the Prices of Their Products in Gold?
AUGUST 01, 1997 by W. J. BROGDON JR.
Filed Under : Inflation, Taxation
How can a business with international sales protect itself from fluctuations in exchange rates caused by monetary policy? One small custom-automobile builder in England is trying a simple, if radical, solution: Marlin Cars of Crediton, Devon, has announced prices for their handmade cars in ounces of gold. Marlin cars combine modern engines, transmissions, and suspension systems with traditionally styled aluminum bodies and box-girder steel frames. In preparing to fill sales orders from various countries, Marlin has become caught up in the growing controversy over European Currency Units.
Terry Matthews, Marlin’s director, said, We’re sick and tired of all this posturing by politicians, pundits, and economists over whether the U.K. should opt in, opt out, or even ‘twin-track’—so we’ve decided to go it alone. We’re more than happy to cut short the debate by quoting the international prices of our cars in gold. Ms. Matthews says that the company is valuing a basic Marlin Hunter two-seat sports-tourer with electric windows, manual gearbox, and a Ford DOHC 2.0 liter engine at 85 ounces of gold.
This means that a customer anywhere in the world only needs to check this figure against the prevailing local rate for gold bullion to get an actual price of one of our cars, she adds. As a standard, the quantity in circulation is relatively stable; no one can easily print more of it to satisfy short-term economic or political goals. As a unit of value, gold is recognized the world over as a hedge against monetary uncertainty.
Strong historical evidence shows that governments consistently inflate money in an effort to obtain more taxes. This has been true at least back as far as the Roman Empire, when Rome began making coins of less valuable alloys. The problem is becoming acute in Europe, where the search for a common currency has revealed in stark detail the reluctance of nearly every country in the European Union to give up control of their money. Conservative economists have tried for years to get governments to readopt the gold standard, with little success. Such decisions are more political than logical, and there are many monetarist economists who think that returning to the gold standard would be disastrous. It certainly would wreck their active monetary policies, but it could give a stable basis for exchange, with low interest rates for borrowing and the ability to save with security.
Is it possible to establish a private gold standard, that is, one independent of government action, one dependent on markets alone? This little company believes it is, strongly enough to become the spearhead of a movement to quote prices in gold. The beauty of Marlin’s policy lies in the inability of any government to forbid it. Countries can forbid private ownership of gold, but can’t prevent their citizens from using the price of gold as a standard for exchange. The danger of this concept lies in the fluctuations in gold prices with respect to local money. Yet that very danger becomes a strength when measured against a currency of declining value. With all the debate about establishing a gold standard and multinational fiat money, why can’t businesses simply quote the prices of their products in gold? Why indeed can’t they establish a de facto gold standard? One tiny company is betting that it can be a start.
—W. J. Brogdon Jr.
Bill Brogdon, a retired captain in the U.S. Coast Guard, resides in Cape Carteret, North Carolina.
State and Society
Some astute observers, such men as Nietzsche and Burckhardt, were warning as long ago as the mid-nineteenth century of the dangers stemming from the new mass-man and the new mass-state. Social critics of our own time, of the stature of Wilhelm Roepke and Ortega y Gasset, have pointed to more and more signs of the dangers inherent in the centralized modern state. Meanwhile, the consolidation of power in the new dispensation has steadily advanced.
In Frank Chodorov’s words: The present disposition is to liquidate any distinction between State and Society, conceptually or institutionally. The State is Society; the social order is indeed an appendage of the political establishment, depending on it for sustenance, health, education, communications, and all things coming under the head of the pursuit of happiness.
Such a system gives far too little to man’s freedom or personality. The state swallows the individual. Even if such centralization were efficient in the satisfaction of human wants, which it is not, the means used to achieve the end would still be unacceptable simply because they are incompatible with human freedom.
Even more dangerous, perhaps, is the risk that the very concept of freedom itself can become so misused and distorted within such a society that no individual dare lay claim to any rights or dignity having a higher source than the society in which he lives. At that moment, the guarantees developed by Western civilization to protect the individual from the arbitrary exercise of power have in effect all been swept away, no matter what label that society might give itself.
Once such checks upon the exercise of power have been removed, all the internal vitality and freedom within such a society are open to destruction in the name of order. Soon the preservation of order or the pursuit of the greatest social good is identified with whatever action the wielder of centralized power deems suitable. Resistance against the exercise of such power comes to be viewed by society not as an expression of human individuality and free choice, but as an assault upon the public good, a crime of the selfish individual against the selfless community.
—George C. Roche III
The Freeman, August 1967
adapted from “Power”
Dr. Roche, a former FEE staff member, is president of Hillsdale College.