Gold standard explained: Seven Fiat myths debunked [Video]

In a recent episode of the Money Metals podcast, host Mike Maharrey sits down with Peter C. Earle, PhD, of the American Institute for Economic Research (AIER) to unpack what the gold standard actually is—and why it still matters in a world of fiat money.

Earle brings both academic and market experience to the table, having spent more than 20 years as a trader and analyst before his work at AIER.

Across the conversation, Maharrey and Earle tackle seven persistent myths people repeat about fiat money and the gold standard—myths that sound plausible until you follow them to their real-world conclusions.

What a Gold standard means

Earle defines a gold standard as a system where the unit of account—dollar, pound, franc, yen—is defined as a specific weight of gold. It’s not just a theme or a symbol. It means currency is convertible at a legally fixed rate.

That convertibility is the point. It forces money to be anchored to something scarce and costly to produce, limiting the ability of governments and banks to create money at will.

Earle puts it in a line that sticks: under a gold standard, “money answers to geology, not to politics.” Maharrey doesn’t hesitate—he’ll take geology over politics any day.

Why Gold became money

Earle rejects the mystical framing. Gold wasn’t chosen because it’s magical. It was selected over long stretches of history because it has the properties reliable money needs: durability, divisibility, portability, and credible scarcity.

Maharrey adds a practical observation that still holds today. You can go almost anywhere in the world, offer someone gold, and they’ll understand its value immediately. They may not want a dollar. They may not want a euro. But gold is recognized across borders because it doesn’t depend on trust in a particular government.

That’s the broader argument: a gold standard ties money to something outside the political system.

Fiat money’s bias toward inflation

Earle contrasts that with the system nearly everyone lives under today: fiat currency, money by decree. It has value because governments declare it has value and enforce its use through legal tender rules and the requirement to pay taxes in it.

Once money is severed from a hard constraint, Earle argues, it becomes discretionary. Central banks are pressured to ease, bail out, and stimulate. That creates an inflationary bias across countries—often not a blowout, but a steady erosion of purchasing power and recurring asset bubbles.

Maharrey frames it politically: fiat money is the engine that drives big government. Earle agrees. With no binding limit, governments can try to be all things to all people—until math wins.

Myth 1: “Gold is outdated or ‘mystical’”

Earle’s reply is practical. Gold became money because it works. It’s scarce in a way that can’t be legislated away, and it resists the human temptation to “fix” problems by printing claims.

That’s why he emphasizes that gold isn’t about vibes. It’s about constraints—and constraints are exactly what political systems don’t like.

Myth 2: “Fiat money is neutral—It doesn’t automatically inflate”

The second myth is that fiat money is simply modern, flexible money, and inflation is optional.

Earle says the bias is structural. In a fiat system, there’s constant pressure on central banks and governments to do “just a little more” easing, “just a little more” stimulus, “just a little more” rescue. Over time, that shows up as shrinking purchasing power and distorted markets.

This doesn’t require a catastrophe. It can arrive as something quieter: asset booms, mispriced risk, and the slow sense that normal life costs more each year.

Myth 3: “We left the Gold standard because it failed”

Maharrey asks the blunt question: if gold standards work so well, why did governments abandon them?

Earle argues they were abandoned because they worked too well at limiting state behavior. Governments don’t want binding limits on spending. They don’t want to lose the ability to paper over errors in debt, fiscal policy, or monetary policy.

Earle also frames the current era as temporary. He describes a long progression from classical gold standards to modified versions, to Bretton Woods, and then full fiat. In his view, we’re in an interregnum—a transitional period that won’t last forever.

Myth 4: “Without Fiat, government can’t respond to emergencies”

This is one of the most common objections Maharrey hears: the gold standard ties the hands of policymakers in emergencies.

Earle calls it historically unserious. Emergencies didn’t begin in the 20th century. Gold-based money existed through plagues, upheavals, and crises. He notes countries sometimes suspended gold during wars and then returned afterward, which reveals what the objection often masks: the desire for unlimited spending capacity.

He also argues that “emergency flexibility” can make responses fast but thoughtless, and sometimes destructive. Maharrey uses COVID as a modern example. Governments could shut down large parts of the economy, largely because they could print money to cover the consequences. Both suggest the long tail of that era is still with us.

Myth 5: “Falling prices are always bad”

Another staple claim is that prices must rise, and falling prices are inherently harmful.

Earle distinguishes healthy price declines from crisis deflation. Healthy declines come from productivity—more output for the same effort. He points to electronics: better laptops and TVs at lower prices over time.

He asks listeners to imagine that pattern across wider categories of life: gently falling prices that raise real incomes and reward saving without killing demand.

Then he contrasts that with destructive deflation caused by monetary contraction. He cites the early Great Depression, when the Federal Reserve raised interest rates and, within roughly 18 months, the money supply fell by “a third or so.” That kind of contraction creates a deflationary crunch. Earle treats that as a separate phenomenon from slow, progress-driven price declines.

Myth 6: “The economy can’t grow unless money supply grows”

Maharrey raises the claim that a growing economy requires an expanding money supply—and that gold can’t support modern complexity like AI and quantum computing.

Earle says growth doesn’t require money printing. Prices adjust. More goods and services can be supported by the same or a slowly growing money base through lower prices.

He also calls the “gold can’t support modernity” argument technocratic arrogance. Gold-based money supported enormous economic leaps long before today’s technologies existed. There’s nothing about modern computing that cancels scarcity, incentives, or the need for disciplined money.

Maharrey adds that digital systems could make gold-backed accounting easier, not harder, because fractional claims can be tracked cleanly without requiring constant physical redemption.

Myth 7: “There isn’t enough Gold to back modern money”

The “not enough gold” argument shows up whenever sound money is mentioned.

Earle says it misunderstands the mechanics. A gold standard doesn’t require convenient one-dollar redemptions for visible flakes of metal. It requires a unit definition. If gold is revalued appropriately and denominated into whatever number of units is required, the system can function.

Maharrey asks directly whether this implies revaluation. Earle agrees. He also argues the cost of converting would be small compared to the ongoing costs of running the fiat system—especially when you include the economic damage created by purchasing power loss and repeated cycles of distortions.

The “hoarding” claim, saving, and human reality

Beyond the seven core myths, Earle addresses the idea that gold would cause hoarding and freeze spending.

He reframes it: call it saving. Saving finances real investment rather than speculative credit. And human life doesn’t stop because prices might be lower next year. People still buy food, fuel, and necessities. Maharrey gives the simple example: even if computers get cheaper next year, you still buy one when your current machine breaks.

Earle adds a deeper point: money still exerts influence even when it isn’t spent. Money held back changes the conditions of the overall money environment. Saving isn’t sabotage; it’s part of how money holds value.

Gold buying, SWIFT, and de-dollarization

Maharrey shifts to the present. He notes rapid central bank gold buying, especially among emerging markets and countries wary of dependence on the dollar.

Earle points to a catalyst “about three and a half years ago,” when the U.S. pressured SWIFT to remove Russian banks from the dollar messaging system. That action signaled to many countries—including allies—that dollar dependence could become a liability.

He sees the gold move as structural repricing, not a short-lived spike like 9/11 or 2008. He describes it as a “60 to 70% increase,” tied to geopolitical fragmentation, fiscal deficits, and skepticism about long-run monetary discipline. He also notes silver’s surge “over $65 an ounce,” and Maharrey adds: “$66 as of today (Wednesday, December 17, 2025).”

On de-dollarization, Earle says it’s real but slow because the dollar is deeply entrenched and Treasuries are widely used as collateral. He mentions an April 2023 article he wrote on de-dollarization that went viral. He doesn’t predict the dollar will disappear overnight, calling it “pretty much the only game in town,” but he agrees that even moderate declines in demand for dollars and Treasuries carry major consequences.