SAN FRANCISCO (MarketWatch) — Every few decades the nation has a financial panic, and in doing so questions its mode of currency. Should we be on a gold standard, or not?

This post-financial crisis era is no exception. The Republicans have just put a plank in their party platform that called for the formation of a gold GCZ22, +1.05% commission, a move that’s generating some buzz on Wall Street.

What would adopting a gold standard accomplish? Reuters

We’ve just come through the worst recession since the 1930s. It’s healthy that we are challenging our monetary system, our fiat currency and the Federal Reserve system.

But if anything, these cyclical crashes only underscore what a folly this is. Reinstitute the gold standard? Please.

Is this what people are doing now that Ron Paul is out of politics?

Look, let’s acknowledge what adopting a gold standard would do:

• It would guard against inflation by linking currency to something in fixed supply.

• In doing so, it would lessen government’s ability, through the Fed, to manage wealth. That’s because inflation effectively shifts wealth from citizens, who can’t print money, to the government, which can.

• It would effectively fix international exchange rates — something that could potentially help us in our imbalance with China and other countries that have gamed the foreign exchange system to their advantage. (China would suffer inflation, U.S. deflation making our goods more competitive.)

It all sounds wonderful, of course, until you consider the downside:

• Deflation is a necessary part of a currency on the gold standard. It absolutely crushes debtors. That’s why politicians talked about the standard nailing people to a “cross of gold.” When you owe money and your wages fall, you may be able to buy the same things at lower prices and maintain a quality of life, but your debt gets bigger.

Returning to the gold standard was a big part of Ron Paul’s presidential campaign. Reuters

• As a result, it would have a dampening effect on the credit markets.

• The government would have little power to do any managing of the economy. It couldn’t set the price of gold, or pump money into the economy by expanding the money supply as the Fed does today.

Now, I don’t want to entirely discount the benefits of the gold standard. The system would do much to solve the problem of debt bubbles and trade imbalances. Nor is the current fiat system perfect. We all know its limitations. If you think all of this so called “managed economy” stuff is working then you probably think we have full employment, a balanced budget and a chicken, or iPhone or its Samsung copy, in every home.

A big problem is that the gold standard never works. It’s like getting back together with that old girlfriend. Your memories of how good it used to be are tainted by your current pain of loneliness. I get it. The pull is very, very tempting. But haven’t we gone down that road enough already? See related commentary on gold as an investment.

Another problem is that rather then try to improve our currency systems, we keep going back to this 600 B.C. technology that’s a step up from seashells. Gold is pretty, but it’s just a piece of metal. Its uses are limited. It can be dug out of the ground. In other words, it’s really all about human confidence that gold is worth something. And, you know, the earth is flat too.

There’s one more thing that bothers me about the gold standard people. They always seem to be of the same economic and political stripe. They are anti-government libertarians who are hell-bent on ending the Fed, shrinking government and letting “free markets” rule.

Should you invest in a hedge fund?

I was reminded of this last week when Seth Lipsky, writing in The Wall Street Journal, argued that gold was coming back to the mainstream. He then went on to acknowledge that all of the people who were against it — Anna Schwartz, Ronald Reagan, Milton Friedman — would probably have been for a gold standard if there wasn’t an overwhelming public, political and economic crowd of voices against it. Read Lipsky’s defense of considering the gold standard.

Moreover, many gold-standard enthusiasts always seem to be gold bugs themselves. They’re deeply invested either financially or ideologically in the idea. Talking about it helps their portfolios, their careers and their self-esteem.

After driving across the country and seeing the devastation the financial crisis — one caused by a credit bubble fueled in part by the Fed — like most Americans, I’m angry and willing to try a radical approach. But I’m not willing to repeat mistakes.

Without a compelling new argument, this discussion should really end there. If investors want to buy and sell gold because they believe it has value, that’s their choice. But to make this faith-based metal our national currency?

You’d have to be a fool.