Hans F. Sennholz, “No Shortage of Gold” (1973)

This file is a short single-author essay, originally a Freeman article, in the genre of Austrian/free-market monetary polemic. It is not a history of the gold standard but a focused reply to one common objection: that a growing economy needs more money than gold can supply. Sennholz opens by conceding the usual virtues attributed to gold—it restrains governments and banks from inflating and provides an international money—then shifts the question from mining output to monetary theory. His thesis is explicit:

There is no shortage of gold today and there has been no such shortage in the past.

The essay’s first conceptual move is to argue that policy follows ideas. The belief in a “monetary needs of business” implies some authority competent to measure and satisfy those needs, and for Sennholz this is already a concession to government control. He treats Keynesians and monetarists as disputing only the rate and method of paper expansion while sharing the deeper dogma that money should be managed.

Economic policies are the product of economic ideas.

Against that dogma he distinguishes money from wealth. People who say they need “more money” usually mean more goods, capital, or purchasing power; multiplying units cannot itself create any of these. Real employment and development require capital goods, not additional claims printed into circulation. Inflation may conceal wage cuts or ease unemployment created by unions and minimum-wage laws, but only by producing boom, recession, redistribution from creditors to debtors, capital consumption, and weakened thrift.

The money supply needs no regulation; it can be left to the free market in which individuals determine the demand for and supply of money.

The middle section makes the hard-money point in its starkest form. Because money is a medium of exchange, any given quantity can perform the monetary function: if there are fewer units, each gains purchasing power; if there are more, each loses it. The relevant shortage is never of exchange media as such but of real goods and capital. Sennholz therefore denies not merely excessive inflation but the premise that the money stock must be adjusted to “the needs” of business.

In a free market economy, it is utterly irrelevant what the total stock of money should be.

He then turns to the objection that gold is costly and therefore wasteful. If gold served only as money, new mining might appear superfluous; but gold is also a commodity used ornamentally, dentally, and industrially. More importantly, its high cost of production is not a defect but a monetary virtue. In “The Law of Costs Applies to Money,” Sennholz argues that reproducible goods tend over time toward cost of production. Gold’s value is protected by expensive production; paper’s negligible cost exposes fiat money to depreciation, even if restraint delays the process.

The law of costs obviously is applicable to gold.

The essay’s final move is political. Sennholz rejects the claim that public management exempts paper money from ordinary incentives. Central bankers, bureaucrats, and politicians gain income, office, prestige, and power from monetary expansion. The profit motive, which in competitive markets disciplines producers toward consumers, becomes destructive when attached to a state monopoly over currency. Welfare promises, deficit spending, and election-year booms give political actors persistent reasons to inflate.

But no matter who manages the fiat money, the law of costs is working quietly and continuously.

The relevance of the essay lies in this fusion of monetary theory and political economy after the breakdown of Bretton Woods. “No shortage of gold” means more than adequate metal supply; it means the alleged shortage is a conceptual confusion useful to governments seeking elastic finance. Gold is defended as an institution that resists regimentation and arbitrary redistribution, while fiat money is portrayed as a weapon of social conflict. Sennholz closes with a warning that inflation is not merely technical mismanagement but a civilizational danger.

For inflation not only bears bitter economic fruits but also has evil social, political, and moral consequences.