What do capital controls and the gold standard have in common?

Both capital controls and the gold standard are both fairly marginal, fringe economic ideas -- but that is more or less where the similarity ends! We have been discussing capital controls in DV409, and the gold standard here on this blog, so I thought a recent column by Paul Krugman in the NYT made some great points related to both.

In comparing the way in which the economic crises played out in Ireland and Iceland, he mentions first that only in Ireland did the government nationalise private debt by providing guarantees. OK, that's not related to this topic, exactly, but it is a pet peeve of mine so I thought I would point that out anyway - government guarantees, explicit or implicit, are often a good thing, but not always, and certainly not in this case, it seems to me. In DV409 we have already discussed a lot of the reasons and conditions under which government guarantees may or may not be a good ideas.

Now, back the point mentioned in the title. The second difference was that Iceland used capital controls to stem initial panic and capital flight. Why might capital controls have been effective for Iceland when they were so ineffective in so many other cases? Hopefully, after reading all our DV409 papers, you now have, if not an answer, some sensible things to say about that.

The last point is that Iceland devalued its currency, something that Ireland, with its fixed exchange rate regime (which is what the Euro area is), cannot do. And this is where the gold standard comes in. That is also a fixed exchange rate regime, and in this case had it been in effect would also have precluded the kind of adjustment that Iceland has apparently had (and seemingly weathered reasonably well, all things considered).

So what do capital controls and the gold standard not have in common? The former is an idea that usually doesn't work, but can be a great policy tool in some select cases. On the other hand, I still have not come across a modern situation where the gold standard would have been a good idea.