An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions.  They seem to sense, perhaps more clearly and subtly than many consistent defenders of laissez-faire, that gold and economic freedom are inseparable , that the gold standard is an instrument of laissez-faire and that each implies and requires the other."

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset.  But government bonds are not backed by tangible wealth, only by government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets.

The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.

They have created paper reserves in the form of government bonds which - through a complex series of steps- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold.

The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.

If there were, the government would have to make its holding illegal, as was done in the case of gold.  If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government- created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.