Even if the mention of a “Gold Standard” makes your eyes glaze over, the video above and the article below show you how a monetary system SHOULD WORK. More importantly, you learn how the US can extract itself from ever-compounding debt. Currently, the FED is destroying savers in the name of “helping” the economy. Learn how credit can expand and contract WITHOUT booms and busts.
I highly recommend this book to understand our current mess and how we can go back to stable money and a prosperous world for all. Before dismissing the idea of a gold standard with thoughts of–there is not enough gold; we tried that before and why gold, we now have Bitcoin–learn first how a gold standard works and then financial and monetary history. Your study will pay huge dividends. Lewis debunks the myth that you need 100% gold-backing for paper money. (See Rothbard’s book,Case for a 100 Percent Gold Dollar)
For a great romp through financial history and the role that gold played: Gold as money Lewis Another great book.
Lewis writes on page 5, “A gold standard system has a specific purpose: to achieve, as closely as is possible in an imperfect world, the Classical ideal of a currency that is stable in value, neutral, free of government manipulation, precise in its definition, and which can serve as a universal standard of value, in much the manner in which kilograms or meters serve as standards of weights and measures.”
The author shows how and why the Classical principle of stable, gold-based money once made Americans wealthy. Why not now?
Stable money along with clear property rights/rule of law and low taxation/regulatory burdens have provided the means for the greatest human prosperity.
In this sequel to Gold: the Once and Future Money, Nathan Lewis describes the theoretical basis of gold-standard monetary systems. Lewis argues that the pre-1913 world gold standard system was perhaps the most successful monetary system the world has ever seen, enabling high levels of economic growth. Descriptions of both Britain’s economic rise under the gold standard and the United States’ rise to economic prominence under gold are also discussed.
Learn how we can move away from our dysfunctional paper-mache currency system.
On February 12, 2014, Nathan Lewis spoke at the Cato Institute in Washington DC, a well-known conservative “think tank,” about the topics in his new book, Gold: the Monetary Polaris. The webcast video of the event is available at the Cato website here: http://www.cato.org/events/gold-monetary-polaris
Does anyone sense a trend over the past three hundred years?
The severing of the dollar link to gold in 19171 and the movement to flexible exchange rates in 1973 removed constraints on monetary expansion. The dollar emerged as the only international money and, in the words of Robert Mundell:
The U.S. Federal Reserve could now pump out billions and billions of dollars that would be taken up and used as reserves by the rest of the world. Not only that, but US government Treasury bills and bonds became a new form of international money. Dollars became the reserves of new international banks producing money in the Eurodollar market and other offshore outlets for international money. The newly elastic international monetary supply was now made to order to accommodate the supply shock of the oil price spike at the end of 1973. The quadrupling of oil prices created deficits in Europe and Japan which were financed by Eurodollar credits, in turn fed by US monetary expansion. The Fed argued that its policy was not inflationary because the money supply in the United States did not rise unduly. The fact is that it had been exported to build the base for inflation abroad. As I showed in an article published in 1971 (IMS in the 21st Century Robert Mundellandmundell-lecture), it is the world, not the national dollar base that governs inflation. Prices rose 3.9 times in the quarter century after 1971, by far the most inflation than at any other time in the nation’s history.
Our Current Situation
Our choices are to restructure the debt, grow our way to repayment and/or print. What choice will the Fed make?
US money supply TMS-2 (components by legal categorization) since 1960 – by Michael Pollaro.
If there were a free market for money, unexpected sudden increases in the demand for money (due to exogenous events like e.g. the threat of war) would likely also see a reaction from the supply side. However, the increase in resources devoted to obtaining a larger supply of the money commodity (in a free market, money would be a commodity with a pre-existing use value) would be strictly guided by the wishes of consumers. Moreover, even if the money supply were completely fixed, a demand for higher cash balances would simply lead to adjustment by raising money’s purchasing power until the higher demand was satisfied (we are assuming that if a free market in money were to obtain, the entire economy would likely be unhampered; prices and wages would be free to adjust).
Given the enduring popularity of inflationary policies, we suspect that lessons that should have been learned long ago will have to be relearned – the hard way.