Gold Bugs Creep Into Republican Campaign

NEW YORK (TheStreet) -- If you want an example of just how insane the Republican primary race has become, you need look no further than the rallying cry that went up as Ron Paul addressed his followers in Nevada Tuesday night: "End the Fed! End the Fed!" Catchphrases of the Federal Reserve-hating, gold-standard-return-advocating extremists, such as "fiat money," are growing commonplace on the campaign trail.

That's right. Gold bugs, the lunatic fringe of investing and economics, have crept into national politics. What's next? Flat-earth advocates? Area 51 conspiracy theorists?

Vote: Where will gold prices finish in 2012?

Sure, Mitt Romney, who doesn't subscribe to any of that stuff, is looking stronger than ever after his Florida triumph. We all know, unless we're on his bandwagon, that Ron Paul hasn't an iceberg's chance in hell of winning the G.O.P. nomination. But Newt Gingrich is still in the race, and, as I'll be describing in a moment, he's almost as much of a dedicated gold-standard guy as Paul. Both Gingrich and Paul are pledging to remain in the race until the convention, and Paul may very well continue through November with a third-party bid.

What that means is that the most extremist vision of monetary policy, a subject so obscure that most voters don't even know it exists, is looming as one of the right's principal priorities in the 2012 elections. And though Romney hasn't climbed on the bandwagon, don't count him out. His record of flip-flopping and pandering to the right makes that a distinct policy.

All this is terrible news for America, because returning to the gold standard is one of the most idiotic ideas to come to the fore in the most intellectually obtuse presidential campaign since the era of the No Nothings. As Paul Krugman pointed out in a December column, the premise behind the idea is just flat-out wrong.

According to the Austrian economic dogma that Paul embraces, we should be in the midst of runaway inflation at this very moment because of all that "fiat money" out there. But we aren't. However, Paul and his supporters have never let the truth get in the way of a good argument, so they are continuing to push the idea that the dollar should be backed by gold. "And what will happen if that doctrine actually ends up being put into action?" Krugman asked. "Great Depression, here we come."