Published in Ayn Rand's "Objectivist" newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967.
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
We've probably all seen a free market economist on a mainstream financial news show at some point addressing the issue of inflation. If you haven't, then you may wish to check out some videos of Peter Schiff or Ron Paul. Many times it seems like arguments arise whenever inflation is mentioned. The typical argument may run something like this:
Free Market Guy: "There is massive inflation in the market thanks to the Central Bank."
Mainstreamer: "There doesn't appear to be any inflation as the CPI has remained steady at 3%."
I propose that at this point the argument is really over definitions and semantics rather than anything of substance. I'll go further to propose a clean and easy way to settle the dispute in a fruitful and educational manner which will allow the opportunity for the real ideas about inflation to be communicated clearly.
When somebody takes the argument that inflation doesn't exist, we should qualify the word. So instead of saying there was massive inflation, we can say there was massive monetary inflation. Monetary inflation inevitably leads to higher prices. It should be easy to get agreement that when the Central Bank increases the money supply, it can be defined as monetary inflation. We can go still further to explain that even if prices remain stable the effects of monetary inflation are detrimental. In a market where prices would normally decline, if prices remain stable we lose the benefits of falling prices which help the poor and the economy.
The CPI is a narrowly defined set of prices which do not indicate the real effects of monetary inflation. The numbers that comprise the CPI also change over time which makes its use as an indicator less effective. Monetary inflation does in fact affect food prices. Food prices are essential to many people. A rise in food prices is a burden upon the most down trodden in society and especially those on a fixed income.
It is also important to note that the price inflation may be separated from monetary inflation by a factor of several months or several years. This also causes a lot of confusion, because many people may look at prices directly following a monetary base increase and thus conclude, "Aha! Monetary inflation doesn't cause prices to rise." The housing bubble is a good example of the time difference. It was the monetary inflation of the early 2000's that ultimately manifested as higher prices several years later. We cannot predict the exact timing or the magnitude of the price increase, but there is no question as to effects which must be caused by monetary inflation.
I believe this definitional work is essential not only in explaining the idea to the newscaster, but also to the viewers who are often not versed in free market economics. You can check out a brief video I made on the subject: If you would like to become an expert in free market economics from your hom you can also check out Tom Wood's Liberty Classroom.
