Customer Reviews

Gold: The Once and Future Money (Agora Series)

5 star:		(11)
4 star:		(4)
3 star:		(3)
2 star:		(0)
1 star:		(1)

 

 

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.

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.

The book starts and finishes strong--the first 100 pages or so and the last 50. But the middle gets very bogged down in intricate economic history with lots of minutiae. The author begins in the mercantile ages, perhaps the 1600s or thereabouts, and continues to the early 2000s. I was disappointed that the last few years were pretty much not covered, as that is what I'm most interested in. Discussion is not limited to the USA and covers the entire world. I think every economic event, significant or not, was touched on. Discussions of US presidents are mostly limited to Nixon, Carter, and Reagan.

So aside from the start and finish of this, this is mostly a book of economic history. Maybe I was expecting something otherwise when I picked it up. I support the author's premise, and he seems very confident in it. I'm new to the gold standard and I plan to learn more about it. I ended up skimming the middle 200 pages or so as I could not bear to read them in depth anymore after entering them. I understand that history is important for lessons, but I prefer summaries of it. It's never been my strong point, and this book is littered with dates and years that have always been anathema to me.

If you're new to the subject of the gold standard like me, this may not be the best initial choice. Or you might want to skip it entirely and instead seek other books or shorter articles online. This review might be somewhat useless, but if anything I would say to be mindful of the history in this book. Consider using Amazon's preview feature to see what I mean.

*Wow, coincidentally it's unbelievable how much I'm in agreement with Average Joe. I also have "The Coming Collapse of the Dollar" on my reading queue.

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.

This is a great book discussing the reasons why Gold will be the ultimate monetary standard and why an individual should consider making gold a part of his personal portfolio. However, the people looking for an investment guide should look elsewhere. This is a history book discussing the possible future of the gold standard in America by historical example from the US and select countries.

It doesn't take 400+ pages to give you reasons why to put some of your money into gold, but this kind of historical detail helps a potential gold buyer understand the yellow metal is not so much an investment as it is an insurance policy. This book reinforced my already skeptical leanings towards the Fed and US monetary policy. It also made me wonder what's being taught in high school history nowadays with respect to economics as it relates to the causes of war. The sections discussing the civil war and WWII in particular were great gap-fillers for me, and the authors explanation of the Japanese financial slump made perfect sense.

Importantly, the author makes it clear on page 114-155 that he does not advocate a 100% gold-backed currency. That is, it is not possible and we should not be expected to back every last dollar with gold. Rather, gold should be part of the system to include a convertibility aspect. The strength of the gold standard comes not from digging up gold and burying it again in government vaults, but from the strength of the governments promise to uphold the integrity of the monetary system. A fixed reserve requirement would assist this promise tremendously. Currently, there is little to reassure anyone of the validity of the "full faith and credit" we now depend upon.

The sections discussing IMF and the upheaval for which they are responsible should be required reading for all members of congress. The IMF is directly responsible for the Asian monetary crisis, the Balkan upheaval and countless other disasters and yet they escape blame every time. The author points out the IMFs hypocritical habit of meddling in less-developed countries with ridiculous and irresponsible policies that would be laughed out of the room in stable economies.

Though the author picks apart nearly every US administration with regard to the dismantling of the gold standard, the book is refreshingly bare of the usual tin-foil-hat-wearer conspiracy theories - always a problem when reading anything about gold standards and monetary policy in general.

There are two small negatives to this book: First, the look forward suggested by the author is highly unrealistic. I pessimistically think there needs to be outright economic collapse and perhaps even conflict before anything will budge bureaucratic inertia. Second would be the books length, but that's a small price to pay for a very worthwhile history lesson.

Overall its a great read.

To read about gold is to read about the history of money. In this very well arranged book, the author present and enjoyable introduction to a central aspect of economics, money, from the differences between soft and hard money, the Gold standard, the uses of Taxes, Central Banking and the history of financial crises. Gold is indeed the most effective way to have stable money, meaning stable prices and this is repeated all along the book so you cannot forget it.

Certainly this is a great book with lots of information and history, where you can understand the financial crisis that have devastated some countries economies, such as the '80 Latin America's crisis or the Asian crisis of '97, most of them problem related to floating currencies imbalance. There is also a very insightful explanation of what happened with Yugoslavia and the rol of the IMF and its "shock therapies" that have only worsened economies that needed their assistance in these moments of perils. Good money is stable money and maybe one day we will be back to it.

First, it is disheartening that there are not even more positive reviews on this book considering the times that we exist in with the Federal Reserve purposefully destroying the value of the dollar. This book is really important on understanding that a dollar is meant as a storage of value, not as a tool to inflict trade wars or inflate your way out of debt, therefore the gold standard is the best way of maintaining that storage value throughout time.

This book advocates the correct gold standard which is pegging the dollar to a gold ounce, such as using a 10 year moving average of the number of dollars to exchange for a gold ounce to find the correct point to peg the number of dollars to gold (too high a dollar/gold peg creates inflation; too low causes deflation). If the dollar/gold peg is say 700 dollars to 1 ounce then this allows the Federal Reserve to contract or expand the number of dollars in the economy to maintain that gold peg (less dollars are needed in a contracting economy and more dollars are needed in a growing economy to conduct transactions, both situations can be accommodated by maintaining the gold peg and the storage value of a dollar stays the same no matter what.) Those who advocate a "hard gold standard", aka using only gold coins, do not understand the gold standard and are usually just the constant doom and gloom types.

So, I would strongly recommend this book if you want to know why a dollar is worth less than it was 30 years ago or now just 6 years ago or how monetary policy plays out across the world. This book uses the best teaching method, which teaches through economic history so you can learn what really caused the Asian Crisis of the 90's, or Japan's Stagnation, or our own hyperinflation of the 70's.

Finally, if you really enjoyed this book I recommend reading The Way the World Works, 20th Anniversary Edition (Gateway Contemporary) this is the fiscal side of the government equation. If you read these two books, you will know more than 99% of the politicians who are supposed to be running our economy and will greatly help in making your own profitable investment decisions.

I'm simply an average joe looking to preserve wealth from the coming inflation in the US dollar. This book did indeed help me understand central banking and how a gold standard can work. However, it contained way too many details with dates and years of various historical events.

What I really wanted, was a book that could help me conceptually understand the commodity of gold in an easy to read format. All in all I appreciated the book and am glad I read it. Perhaps I would have enjoyed this more had I read "The Coming Collapse of the Dollar and How to Profit from It" first as it did not dive into obscure details of historical events.

...but too detailed and somewhat tedious. Still, an informative study of the world of finance; not just gold. I learned a great deal.

With the many serious problems in the housing markets , a falling U. S. dollar , rising commodity costs & rising inflation ; what better time for a very well written & easy to read book on the topic of mysterious GOLD !!

So widely known , but so poorly understood and so much intentional or unintentional misinformation on the history & practical use for GOLD , this book is very well timed !

Not some boring economics book , you learn the Truth about gold and why it has always been an important part in the civilization of man !

A must read in these financially disturbing times !!!