From a post on Ron Chusid’s site about Steve Bainbridge’s opinion of Ron Paul, for some reason followed a link to this — which turned out to be the closest thing to a sane comment posted on NRO since they locked their founder in a closet for saying “y’know, maybe the war in Iraq was a bad idea”.  The relevant bit, within a criticism of a return to the gold standard, is a description of the current situation as Frum sees it:

Right now, the United States is in the midst of a huge rebalancing of its external accounts. A big current-account deficit has begun the inevitable and ineluctable shift to a correspondingly big current-account surplus. The mechanism by which this will occur is a decline in the trade-weighted value of the US dollar. As the dollar buys less abroad, Americans will be constrained to consume fewer foreign goods and services - and foreigners will be induced to buy more from Americans.

With luck, this process will occur without a recession. The pace of domestic economic activity will continue brisk, dollar-denominated incomes will remain stable or even rise, unemployment may even decline as exports accelerate. This is what happened in 1985-86, the last time we saw a big drop in the value of the dollar.

The assumed outcome is much rosier than I’d imagine, and he doesn’t acknowledge the real reason for that account deficit in the first place (decades of attempting to rig international trade for a few, one of the ways the post-WW2 global power vacuum was filled), but the meat of it is right.  The dollar is coming down because in a way it has to, the balance really makes no sense anymore & the rest of the world is responding accordingly.

Now, the short question: say the Fed were abolished & the current fiat system were killed off, but gold itself was ruled out as the backing.  What’s behind door number three, in your opinion, and why?