Why Is The Gold Standard Such A Bad Idea

One word, deflation:

It's hard to understand why conservatives have been so up in arms about quantitative easing when you look at the reality. Yes, the Fed has expanded its balance sheet to unprecedented levels, but if it hadn't done that prices would probably be falling a bit now. But how will the Fed eventually mop up all this liquidity it's created -- hasn't it lit the fuse of an inflation time-bomb? No. The Fed can increase the interest it pays on reserves, do reverse repos, or use term deposit facilities to prevent banks from lending out too much money, if it comes to that.

The gold standard is a solution in search of a problem. Actually, it's worse than that. It's a problem in search of a problem. Prices would have to fall a great deal if we adopted the gold standard today. In other words, it would turn the imagined problem of price stability into a real problem of price stability. And, of course, this ensuing deflation would send the economy into a death spiral due to still high levels of household debt.

Whether it's 1896 or 2012, it doesn't make sense to crucify our economy on a cross of gold.

Why conservatives are pushing this poppycock, I just don't understand.