THE GOLD COMMISSION has now performed the modest public service of stating the obvious. The United States, it concludes, ought not return to the gold standard. For some months, the commission has provided one of Washington's more ludicrous sights. Seventeen people solemnly gathered around a large table at the Treasury to discuss a proposal that most people correctly believe to be impossible even if it were desirable, and undesirable even if it were possible. The whole performance has been little more than another tedious concession to a small sect of monetary ideologues.
It is their view, impervious to all evidence, that a gold standard brings rising prosperity and an end to inflation. Some of the defects in their case are noted in a brief but useful passage in the report published last week by the president's Council of Economic Advisers. If a gold standard brings stable prices, how come wholesale prices fell by half in the 30 years after the Civil War? And how come they then doubled in the years before World War I--all of this creating a succession of deeply damaging panics and crashes?
There's no particular harm to the Gold Commission's suggestion of a gold medallion being sold by the government as long as it is not regarded as currency. But the further suggestion of exempting this medallion from capital gains taxes is another touch of wrongheadedness that seems to infect the whole subject of gold like a kind of intellectual chicken pox. Both the president and Congress talk endlessly, and rightly, about the need for productive investment that generates jobs, goods and technology. Why in the name of common sense create a tax incentive for investment that is always totally unproductive?