The Project 2025 conservative policy framework has recently garnered significant attention as journalists, lawmakers, and scholars analyze its various recommendations. While much of the focus has been on its social policy and executive authority proposals, one economic suggestion stands out for precious metals investors: the reintroduction of the gold standard.
This extensive document, exceeding 900 pages, was developed by the Heritage Foundation to influence the policy direction of a potential future Republican administration in 2025. Initiated in 2023, the Project emphasizes restoring what its advocates perceive as fundamental American values and governance principles.
Among the Project’s key proposals are the dissolution of the Departments of Education and Homeland Security, a ban on the morning-after pill, and the enforcement of a “biblically based” definition of marriage and family by Health and Human Services. Additionally, it suggests placing the entire federal bureaucracy directly under presidential authority.
Despite the implications of these proposals, Donald Trump, a prominent Republican presidential candidate, has distanced himself from Project 2025. Following Heritage Foundation director Kevin Roberts’s controversial remark that the U.S. is “in the process of the second American Revolution,” Trump declared on social media, “I know nothing about Project 2025… I disagree with some of the things they’re saying and some of the things they’re saying are absolutely ridiculous and abysmal.”
However, the involvement of six of his former Cabinet members in drafting the document, along with contributions from over 140 individuals associated with his administration, indicates that it reflects the prevailing sentiments—albeit with contradictions—within the American conservative policy landscape.
The monetary proposals within Project 2025 echo the extremes seen in its social policies. Chapter 24 advocates for the abolition of the Federal Reserve and the privatization of the currency system, with the gold standard positioned as a stepping stone toward that objective. This chapter was authored by Paul Winfree, who previously served as Trump’s Deputy Assistant to the President for domestic policy.
To explore the implications of this proposal and its potential impacts on modern economic practices, Kitco News consulted two leading experts in economic theory and monetary policy: Michael Bordo and John Cochrane.
Dr. John Cochrane, a respected figure in financial economics and macroeconomics, holds the title of Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution. Since 2016, he has also been a professor of finance and economics at Stanford Graduate School of Business. Cochrane’s research emphasizes the connection between macroeconomics and finance, highlighting how household and business decisions shape economic outcomes based on prices and financial returns.
Dr. Michael Bordo is recognized as one of the foremost experts on monetary policy and the gold standard. He serves as a Board of Governors Professor of Economics and a Distinguished Professor at Rutgers University. A research associate at the National Bureau of Economic Research and a Distinguished Visiting Fellow at the Hoover Institution, Bordo has authored several influential works on the gold standard and economic history.
The Debate Over Free Banking and the Gold Standard
The two primary monetary approaches proposed in Project 2025 are “free banking” and a return to the gold standard. Advocates argue that these strategies would foster greater economic stability and curb government incentives to inflate the money supply.
Winfree describes a free banking system where neither interest rates nor money supply is controlled by the government. “Under free banking,” he states, “the Federal Reserve would be effectively abolished,” with the Department of the Treasury focusing primarily on managing government funds. He argues that competition among banks would ensure a stable currency and prevent irresponsible lending.
However, both Cochrane and Bordo are skeptical of the free banking model, citing historical evidence of instability associated with unregulated banking systems. Bordo asserts, “The historical evidence is so strongly against free banking that it’s a joke that they’re even talking about it.” Cochrane echoes this sentiment, noting that the free banking experiments of the past, such as those in the U.S. before the Civil War, ultimately led to significant economic turmoil.
Critique of the Gold Standard
While Winfree regards the return to a gold-backed currency as a viable alternative to abolishing the Federal Reserve, Cochrane and Bordo view this proposal through a more critical lens. They argue that the gold standard is based on an idealized vision that overlooks its historical failures, including severe inflation and deflation cycles. Bordo notes, “The gold standard did not give us absolute price stability… What it gave us was long-run price stability,” but with extreme fluctuations over shorter periods.
Cochrane warns against the assumption that gold can consistently stabilize the dollar’s value, highlighting the inherent volatility in gold prices. “Notice how much gold goes up and down relative to the dollar,” he said, questioning whether Americans would tolerate significant price swings in everyday goods.
Moreover, both economists emphasize that the gold standard does not eliminate government intervention in currency value. Instead, they argue that governments have historically manipulated gold prices to stabilize their economies, undermining the premise of a purely gold-backed currency.
The Future of Monetary Policy
Cochrane suggests that while there are attractive aspects of a fixed monetary standard, current economic realities necessitate a more nuanced approach. He posits that a system where the Federal Reserve aims for price stability without being tied to gold might be more appropriate for today’s economy.
Bordo concurs, arguing that while the principles behind the gold standard still hold merit, attempting to revert to a historical system that has been proven to fail is misguided. “It’s like saying we’re going to put back steam engine railroads across the country… that’s a dumb idea,” he concluded.
As Project 2025 continues to stir debate within the conservative movement, the viability of its economic proposals remains contentious, with experts divided on their practicality and effectiveness in today’s complex financial landscape.
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