Debasement is not the gold standard

I read the article The Gold Standard: Solid as the Paper It's Written On by James Kostohryz on Minyanville with interest. The site wouldn't let me register for whatever reason, so I'll leave my comment here, instead. His thesis is that the gold standard has always led to the same monetary problems as fiat currency systems. Individuals and governments spend beyond their means, so issuers of money inflate to bail them out. This process of debasement can be done whether on a gold-standard or fiat system, and all monetary systems in history have been destroyed in this way.

First, we can agree that money issuers can debase whether ostensibly on a gold standard or not. An issuer of money, whether a private bank or a government, can change the precious metal content in physical coins or, more easily, issue more paper money substitutes and change the exchange rate between the paper substitutes and precious metals stored in a vault somewhere. However, this debasement has nothing to do with the gold standard. Once an issuer debases, they have simultaneously go off the gold standard. The monetary problems that are alluded to in the article can be traced to the debasements, not the gold standard. Whether they establish a new gold standard after the debasement is irrelevant. Whether it is announced or done surreptitiously is irrelevant. Either way, it is theft, not the gold standard. Perhaps this objection is just semantics, but a better thesis for Mr. Kostohryz's article would be that the world has never seen a gold-standard monetary system for very long, not that it works just as poorly as a check against monetary instability as fiat monetary systems.

Second, the author of the article attributes the reason for debasement to individuals and governments spending beyond their means; however, he has the causation backwards. Debasement (and fractional-reserve banking) make it easier for one to spend beyond their means. Inflation leads to easy credit, and people take out loans that they cannot repay. The reason why governments debase, as explained by Murry Rothbard in his book What Has Government Done to Our Money?, is that inflation is easier than taxation, or direct confiscation of wealth. Private banks may debase, too, as a way to cheat on the balance between revenue from loans and obligations to savers.

The article suggests that the root causes and solutions of monetary instability run deeper than the materials of which the money is made. I can agree. When governments spend too much, there is too much temptation to debase their own currency. When banks inevitably become insolvent after committing the fraud of fractional-reserve banking, they should be allowed to fail.

The definition of the word radical is going to the root of the problem. The radical solution to monetary instability is to repeal all legal tender laws and allow private banks to issue competing currencies. A market free of any restraints will choose the best.