By Alan Reynolds —

Alternative monetary systems cannot be evaluated in isolation, but only in comparison with other arrangements. The question “why gold?” thus divides into two other questions. The first is “compared to what?” The second is “why not?”

 Criticism of gold usually considers the second question first, as though a superior option was known to exist. We will therefore begin by showing that the usual criticisms reflect fundamental misunderstanding about what a gold standard is, how it works, and even when it was in effect. There will then be a brief historical comparison of metallic and fiat money, and a theoretical criticism of hypothetical alternatives. We will also explain why it was in the interests of even myopic government officials to return to gold in the past, and why it is also in their interest today.

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