If you worry about inflation, thank your lucky stars we have fiat currency!
Matthew Martin 6/26/2013 02:08:00 PM
"The price of gold has declined about 35 percent since its peak in late 2011, which would have meant enormous inflation in a gold-backed economy."This is a point I've made before--that the gold standard involves massive price volatility--but it never seems to make any difference to the gold bugs, even though the harms of price volatility seem to be their only argument.
So, without further ado, here's a comparison between the annual percent inflation we actually had with the fiat currency (red line) to the percent inflation we would have had under a gold standard (blue line):
The red line is actual inflation as measured in percent change from previous year in the personal consumption expenditure deflator (which is the most accurate and unbiased possible measure of consumer prices). The blue line shows the percent change from previous year in the quantity of gold required to buy the same basket of consumer goods and services--that is, it shows what inflation would look like with a gold standard.
In fact, the expression "boom-and-bust" was originally coined to describe the uniquely volatile nature of the gold standard. In reality, the fiat currency has flattened out most (but not all, clearly) of the business cycle. But I suspect none of that data matters to a Paulite, because they think they have some deeper, more important truth: they know, just know, that the monetary policies of Diocletian caused the eventual demise of the Denarius and collapse of the Roman Empire some 200 years later. And that Bernanke is dooming us all (erm, I mean our grandchildren's grandchildren) to the exact same fate.