Milton Friedman: Real and Pseudo Gold Standards
by Milton Friedman
Mont Pelerin Society
September 1961
International monetary arrangements have held a consistently important place among the topics discussed at the meetings of our [Mont Pelerin] Society. This is eminently fitting, since there is probably no other major facet of economic policy with respect to which liberals (in the sense of our Society) reach such divergent conclusions from the same underlying principles.
One group, of which Philip Cortney is a distinguished member, favors a continuation of the formal linking of national currencies to gold, rigid exchange rates between different national currencies, a doubling or more than doubling of the official price of gold in terms of national currencies, and an abandonment of governmental measures designed to evade the discipline of gold. This group is apparently indifferent about whether gold circulates as coin; it is satisfied with a gold bullion standard.
A second group, represented by the Economists’ National Committee on Monetary Policy, also favors a continuation of the formal linking of national currencies to gold together with rigid exchange rates between different national currencies. But it emphasizes the importance of gold coinage and of a widespread use of gold coin as money in national as well as international payments. Apparently, this group believes there is no need for a change in present official prices of gold, or, at least, in the Unites States price.
A third group, of which I count myself a member, favors a separation of gold policy from exchange-rate policy. It favors the abandonment of rigid exchange rates between national currencies and the substitution of a system of floating exchange rates determined from day to day by private transactions without government intervention.
With respect to gold, there are some differences, but most of us would currently favor the abandonment of any commitment by governments to buy and sell gold at fixed prices and of any fixed gold reserve requirements for the issue of national currency as well as the repeal of any restrictions on private dealings in gold.
I have stated and defended my own policy views elsewhere at some length. Hence, I would like to use this occasion instead to explore how it is that liberals can reach such radically different conclusions. Read more…
Paul Krugman, a Nobel winning economists, has found himself as the new voice of Keynesianism; a form of economics which supports the idea that government spending indeed helps to lead to economic prosperity. Krugman supposedly has a track record of predicting economic crisis while maintaining his Keynesian mantra. He is a staunch supporter of government spending and has even said on 
