With virtually every consumer product tied in some way to gasoline, it didn't take an economist to figure out that an increase in inflation was on the way. Inflation rose at the highest level in seventeen years in 2007. A dollar today buys about four percent less than it could a year ago. The word "inflation" was starting to strike American ears as something akin to "cholera" or "small pox"--afflictions that affected people a long time ago, not us.
Though not discussed much, inflation affects Americans today more than it affected their ancestors. Usually, this is not because of external factors beyond our direct control, such as petroleum prices. It is because the government is committed to a policy of inflation through the Federal Reserve, an outfit established, in part, "to furnish an elastic currency." We may think inflation a bugbear of cranks and antiquarians, and of antiquarian cranks, but it's a problem more of the present than the past even though we choose to act as though it were not a problem. Perhaps, as a society, we dismiss concerns regarding inflation because our government is committed to a policy of inflation.
It wasn't always this way. Prior to the establishment of the Federal Reserve in 1913, inflation was virtually non existent. As the excellent website MeasuringWorth.com demonstrates, a dollar from 1790 inflated less than ten cents in the century and a quarter that followed. In other words, inflation existed but not in a manner in which the average person would notice. What's happened to that dollar from 1913 to today? It's worth about a nickel now.
A policy of managed inflation should be opposed on Constitutional, ethical, and practical grounds. First, the Constitution empowered Congress, not the Fed, to coin money. It would require a Constitutional amendment, not a mere legislative act, to outsource this duty. Second, a dollar is a measure, like a weight or a length. Making today's dollar like yesterday's nickel is a bit like getting a slice of roast beef when you asked the butcher for a pound, or getting a dixie cup of beer when you asked for a pint. It's unethical to purposefully alter fixed measures, such as a pound, a foot, or, yes, even a dollar. Third, managed inflation through the Federal Reserve has resulted in a depreciation of the dollar of 95 percent in less than a century. This has been a disaster.
Unfortunately, many conservatives view conservatism as a mechanism to preserve the gains of liberalism. The income tax, Medicare, and yes, the Federal Reserve system, were all opposed by significant numbers of elected conservatives when they were first proposed. They are upheld by all but a few elected conservatives today. This is unfortunate. The norm in American history is the absence of the Fed, the IRS, and Medicare. Though the current inflation woes may have less to do with the nation's printing presses working overtime than with foreign oil pumps taking a vacation, it's still worth taking the long view: that something many Americans now dread--inflation--is the stated policy of their government.
The gold standard had problems of its own. It led to a depression every decade or so.
The only real solution to the problem of the money supply is free banking. Turn the coining of money not over to congress, but to the market.
Ben T: And don't we get into a recession at lest every ten years "or so"? According to Kevin Hassett (http://www.washingtonpost.com/wp-dyn/content/article/2008/01/18/AR2008011802872.html), recessions weren't really worse in the preWWI days, even if they perhaps have gotten a little shorter, on average, since WWII. Is that because of the fed? Even if it were, is the massive inflation worth that gain?
I think that amassing gold may be unneccesarily difficult practically speaking, but that stopping government coinage (especially in one swoop) would be incredibly unwise. Why can't we just have Congress set a medium-term coinage rate that increases according to projected increased productivity?
