Gold: The Once and Future Money (Agora Series) [Hardcover]

Nathan Lewis (Author), Addison Wiggin (Foreword)

Book Description

Publication Date: May 4, 2007 | Series: Agora Series (Book 24)

For most of the last three millennia, the world’s commercial centers have used one or another variant of a gold standard. It should be one of the best understood of human institutions, but it’s not. It’s one of the worst understood, by both its advocates and detractors. Though it has been spurned by governments many times, this has never been due to a fault of gold to serve its duty, but because governments had other plans for their currencies beyond maintaining their stability. And so, says Nathan Lewis, there is no reason to believe that the great monetary successes of the past four centuries, and indeed the past four millennia, could not be recreated in the next four centuries. In Gold, he makes a forceful, well-documented case for a worldwide return to the gold standard.

Governments and central bankers around the world today unanimously agree on the desirability of stable money, ever more so after some monetary disaster has reduced yet another economy to smoking ruins. Lewis shows how gold provides the stability needed to foster greater prosperity and productivity throughout the world. He offers an insightful look at money in all its forms, from the seventh century B.C. to the present day, explaining in straightforward layman’s terms the effects of inflation, deflation, and floating currencies along with their effect on prices, wages, taxes, and debt. He explains how the circulation of money is regulated by central banks and, in the process, demystifies the concepts of supply, demand, and the value of currency. And he illustrates how higher taxes diminish productivity, trade, and the stability of money. Lewis also provides an entertaining history of U.S. money and offers a sobering look at recent currency crises around the world, including the Asian monetary crisis of the late 1990s and the devastating currency devaluations in Russia, China, Mexico, and Yugoslavia.

Lewis’s ultimate conclusion is simple but powerful: gold has been adopted as money because it works. The gold standard produced decades and even centuries of stable money and economic abundance. If history is a guide, it will be done again.

Nathan Lewis was formerly the chief international economist of a firm that provided investment research for institutions. He now works for an asset management company based in New York. Lewis has written for the Financial Times, Asian Wall Street Journal, Japan Times, Pravda, and other publications. He has appeared on financial television in the United States, Japan, and the Middle East.

Editorial Reviews

From the Inside Flap

In the first years of this new century, the price of gold nearly tripled. Why should today's investors take notice? Because gold is the ultimate competitor to the U.S. dollar. In this age of increasing global competition and military conflict, ignoring the gold market could be devastating for anyone seeking to build wealth over the long run. A vote for gold is a vote against the dollar, against paper money . . . and paper assets. It's a way of saying, "Yes, we know Mr. Bernanke, Mr. Bush, and Goldman Sachs are doing a good job, but it might be a good idea to have some REAL money, just in case."

The world's commercial centers have used one or another variant of a gold standard for most of the last three millennia. And for good reason: gold forces governments to be fiscally responsible and it provides a stable environment for rapid economic growth as well as a safe environment for individual investors to grow their own wealth.

For the last thirty-five years, the U.S. government has been able to "print" money at will. If history is any guide, this government will do as all governments have in the past: overprint, causing the currency to crash. Inevitably, they will be forced to return to the gold standard, but at great expense and with considerable suffering. Investors who are not prepared will suffer the most.

Unfortunately, asserts Nathan Lewis, both advocates and detractors of the gold standard grossly misunderstand the inner workings of this human institution. In making his case for a return to the gold standard, Lewis takes a whirlwind tour of money in all its forms, from the seventh century B.C. to the present day, explaining in straightforward layman's terms the effects of inflation, deflation, and floating currencies along with their effect on prices, wages, taxes, and debt.

Lewis also provides an engaging history of U.S. money and offers a sobering look at recent currency crises around the world, including the Asian monetary crisis of the late 1990s and the devastating currency devaluations in Russia, China, Mexico, and Yugoslavia. And, in doing so, explains why making gold a part of your portfolio has never been more important than it is today.

The ultimate conclusion of Gold: The Once and Future Money is simple but powerful: the gold standard produced decades, even centuries, of solid money and economic abundance. If history is any guide, we can –and should–abandon this era of easy money and return to the stability of the gold standard.

From the Back Cover

Praise for GOLD

"When it comes to international monetary economics, most economists fail to connect the dots. In many cases, they fail to even see them. Gold doesn't suffer these problems. Nathan Lewis's book is a readable account of the present in light of the past for purposes of the future."
—Steve H. Hanke, Professor of Applied Economics, The Johns Hopkins University

"Gold is the ultimate hedge against crisis and inflation. You can't depend on paper money assets to protect you during a panic. Hard assets are the only guarantee as an insurance policy against bad times. This book gives you the historical perspective to prepare you for the unknown."
—Mark Skousen, Editor, Forecasts & Strategies

"Gold: The Once and Future Money is a 'how-to' manual for understanding the true nature of money and a guide to the action you should take to protect your wealth."
—Byron W. King, Editor, Outstanding Investments

"A money payment must involve a tendering of tangible money, gold, or silver, or of a credit instrument entitling the owner to the undoubted right of its redemption, in gold or silver. As Nathan Lewis makes clear, the world, as of the year 2007, does not possess a means of payment. That humanity is unaware of the stupendously important fact that it lives in a world without money is perhaps the most singular feature of our contemporary world."
—Hugo Salinas Price, President, Mexican Civic Association Pro Silver

"In this delectable tome, Nathan Lewis describes the booms, busts, the bubbles, and the crises in the economies of dozens of countries, from centuries ago to the present day. It is a romp through history, illuminating along the way money in all its forms—from wampum and shells to silver and gold—and details the catastrophic effects of inflation, deflation, floating currencies, and every kind of tax a government functionary could dream to impose on an economy. Gold highlights the folly of human beings throughout history who think 'the economy' is but a machine to be tinkered with and fine-tuned like a Bentley, or worse, a rusty Yugo."
—From the Foreword by Addison Wiggin, author, The Demise of the Dollar

See all Editorial Reviews

Product Details

• Hardcover: 464 pages
• Publisher: Wiley; 1 edition (May 4, 2007)
• Language: English
• ISBN-10: 0470047666
• ISBN-13: 978-0470047668
• Product Dimensions: 6.1 x 1.4 x 9.1 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 4.3 out of 5 stars  See all reviews (21 customer reviews)
• Amazon Best Sellers Rank: #212,717 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

127 of 134 people found the following review helpful

5.0 out of 5 stars Great book! July 17, 2007

By Kaveh Hariri

Format:Hardcover

Let me start of by saying that it seems the last reviewer didn't even read the book! This book pushes a "type" of psuedo-gold standard, not the original gold standard. That said, the problems laid out by the reviewer don't even make sense under a true gold standard. A true gold standard does not mean that people use gold coins to purchase groceries or even homes. A gold standard, in the classical sense, means that there is no Federal Reserve or Central bank, at least not in its current form, and the dollar is DEFINED as a certain weight in gold. The monetary act of 1792 actually defined the dollar as 1 ounce of silver and then fixed the weights and measures of silver vs gold at 15 to 1. This was their error, so to speak.

Even under a true gold standard, where no central bank exists, paper dollars do exist, as do checking accounts, savings accounts, et al. The process would work much like it does today with the exception that a paper dollar would be in the form of a receipt on gold. Private banks would hold your gold (some percentage of it) on reserve at the bank while issing you a deposit or savings account with the right to draw on the account in question. But I'm digressing --i don't have time to outline the true classical gold standard. This book espouses no such thing as the classical gold standard ---it pushes a psuedo gold standard which I describe below:

It is a gold peg. Peg the dollar at a certain value of gold --say the current price of $660 per ounce. Currently the FED is responsible for setting interest rates, the discount rate directly and the FED funds rate indirectly through money supply adjustments. The authors of this book want the market to set the rate of interest, and the FED to be replaced with a currency board which has only one directive ---adjust the money supply in order to keep a constant value of dollar/gold ---at our $660 target. Interest rates would then be set by the market and money supply would be set by gold itself ---a much more stable form of money. This would be a pseudo gold standard ----as long as the market is open and free for gold exchange internationally, then there would be an automatical gold convertability for all people. The government would need to hold $0 gold because people could simply go out and convert their dollars into gold on the open market ---if they did on balance, the currency board would then need to decrease the supply of money in circulation in order to keep the peg (assuming all else stayed constant). If the USA went first, then all countries would follow ---this would create a one world currency, gold with dollar/yen/pound/euro simply representing different quantities of the same currency, as pennies, quarters, dimes, dollars, represent different quantities of the same currency now, the US dollar. This would provide automatic adjustment to imbalances of trade ---long discussion here.

I recommend this book because of the history aspect and the understanding of gold/monetary issues. These authors understand the classical economist theories very thoroughly --with one great misunderstanding. This is the only downfall in the book ---they don't quite understand how inflation of the money supply creates bubbles or misallocated resources. Thus, they don't understand the boom/bust process as outlined by the Austrian school very well. They correctly understand taxes but do not have the same understanding with government spending. They understand free trade.

I would give this book a 5 out of 5 even though there is a big mistake of not understanding other causes of the business cycle --namely the boom bust cycle brought on by monetary inflation and misallocations of capital.

56 of 67 people found the following review helpful

4.0 out of 5 stars While not completely convincing, and interesting presentation of the argument for "hard" money June 2, 2007

By Craig Matteson HALL OF FAMETOP 500 REVIEWER

Format:Hardcover

I have to say that I am by nature in favor of stable money, realistic currency valuations, and conservative accounting in private affairs and especially in public affairs. To allow politics to pretend they have a magic solution to defy the laws of economics (or simple arithmetic) to make everyone better off has never worked and can never work. Just as getting a new line of credit that you use up and spend immediately seems like new wealth for a brief period of time, the piper still must be paid on the other end. Even if you come into some money and can pay it off without terrible hardship, you have still pre-spent this money. Yes, there are good uses of credit, but most government expenditures are no better than running up credit cards on going out to eat and buying items that will be worn out long before the credit is paid off.

This is why there is an ardent group of people who want to base the value of money on a commodity rather than using fiat money (money whose value is what the government claims it to be - what we have). This book makes a pretty good case for using gold and for those interested in such things, it is something one could read and get up to speed on the issues involved. Besides a great fondness for gold, these folks have an especial hatred of central banks of all stripes and see them as tools of the forces that would undermine liberty, freedom, and personal independence. While unusual, they aren't crazy and deserve more of a hearing than they are usually given.

Still, there are some basic problems with the story as I see it. The first is that the author uses quotes from various "authorities" as proof texts. There isn't much context provided for the quotes and when there is an interpretation provided to help us understand what the quote means, it is conveniently supportive of the author's point rather than helping us understand the point the author was trying to make in his time and circumstance.

A second problem is that the author is not clear enough about the problems of using gold as money. For example, if gold is used as coins it isn't long before a one ounce coin provides less than an ounce of gold. This is caused by wear (whether natural or induced, called "clipping" - some people scrap off small amounts of gold from any number of coins to get "free money"). Another problem is that people can do things like drill out gold and fill it with lead and then cover up then put a smooth edge of gold around the coin. So, are you willing to assay the coins for each transaction? The author refers to Isaac Newton being in charge of the British Mint, but doesn't really say why. It was because of the debasement of the coins and getting the coins sound again was not an easy task.

Sure, you can use paper currency that is defined in relation to gold, but there are problems with this despite the "one world currency" hopes of the gold backers. If a nation backs its currency with gold reserves, it is almost impossible to prove those reserves are maintained. Nor is it easy to decide the ratio of paper money to the actual reserves. The supply of paper bills fluctuates and nations (or the leaders of a given time) can secretly sell reserves. Either or both of these difficulties (and others) can turn the promise gold backed notes into what amounts to fiat money.

If people expect the private gold market to accept government definitions of their currency and trade their real gold for paper certificates representing an asserted value, I cannot understand how that is different than fiat money. What in the world is to prevent a seller of gold to change his price based on his personal view of a given currency and their monetary policies. The present peg of the Yuan is a great example of an intentionally mispriced currency to support their vast export business and to collect foreign exchange currency. The gold market would respond to this by revaluing it themselves, would they not? We saw this kind of split between official and market prices in the old USSR.

A third problem, and one I really didn't see addressed in the book, is the change in gold supply. The so called inherent value of gold is not really true. In times of famine you can't eat gold, for example. Also, if we have a fixed supply of goods and a fixed supply of money pursuing those goods or growing no faster than the supply of goods, then prices should remain stable. However, if the supply of goods grew faster than the money supply, deflation would actually occur because less money would be available per good to be purchased.

However, what if the supply of gold were suddenly to increase? This has happened more than once. When all that gold from the New World showed up in Europe, it caused deflation in the value of gold (and inflation of prices) and imposed a real economic hardship on many. This is also true when new processes allow more gold to be produced, the supply of gold (or silver or platinum) increases and causes inflation as sure as printing more fiat money. More money chasing the supply of available goods. This was part of the problem with bimetallism advocated in the "Cross of Gold" speech by William Jennings Bryan (not Bryant as the author refers to him). Pegging the dollar to silver would have caused inflation and allowed farmers and others to pay back their debts with cheaper dollars.

Another problem is that industrial processes use gold nowadays in ways that were not in play in centuries past. So, the gold used in circuits and so forth would not be available for money. Whereas gold fashioned into jewelry of products such as watches could easily be recovered if the value of the gold exceeded the value of the item. While recycling gold from high tech products is done, it isn't always done and that gold has to be subtracted from the available stock. How is it tracked?

There are also some aspects of seeming carelessness in the book. For example, calling William Jennings Bryan, a Secretary of State, three time candidate for President, and distinguished in many other ways, as Bryant really needs to be corrected in subsequent printings of the book. Also, some of the graphs aren't quite clear. For example, on page 49 the Y axis says Gold ounces and then gives integers from 0 to 6. Are these straight ounces (of course not) or hundreds, thousands, millions? Not stated in the graph. There should also be a scale showing the graph in dollars (on the right).

And when an author refers to himself as "formerly the chief international economist of a leading economic forecasting firm" without saying which firm it leads to suspicion and doubt. This weakens the reader's faith in the author's credibility.

If you are interested in the case for gold as money, this is along the lines of what I usually hear from its supporters. However, I would also recommend strongly Milton Friedman's excellent "Money Mischief" before you take this material as the final word on this important subject.

10 of 11 people found the following review helpful

5.0 out of 5 stars A Must for Anyone Who Wants to Understand Monetary Policy August 30, 2007

By DickFox

Format:Hardcover

Nathan has written a masterpiece. He takes the concept of money to its very beginning and then uses easy to understand examples to educate us about the simplicity of monetary policy. This book is easy to understand by the average intelligent person.

A person educated in the economics of the day may have difficulty fitting these simple and sound concepts into the complex fallacies that are taught in most economics classes today, but an open-minded, teachable economist will benefit greatly from Nathan's book.