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Gold, Peace, and Prosperity

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Ron Paul's easy-reading 57-page monograph addresses the history and current condition of our money and banking system, which he argues is solely responsible for inflation. Dr. Paul, a rising star among presidential candidates, originally entered politics in the 1970s because of his strongly-held convictions about Austrian economics in general and honest money in particular. Among the points he makes are:

* The 1913 Federal Reserve Act made it possible to finance our catastrophic entrance into WW I.

* The Fed's structure was inherently inflationary, requiring only a fraction of gold backing for notes and deposits.

* Contrary to mainstream views, depressions are the result of creating money out of thin air, which is how Austrian economists define inflation. For obvious reasons the monetary authorities never refer to it this way, but instead describe it as Fed open market purchases, or providing "liquidity" or "accommodation." Inflation thus increases the money supply artificially, an operation identical in its effects to counterfeiting, and fosters the malinvestments that make a correction (recession) necessary.

* Unlike previous panics and recessions in which government stayed out of the way, the 1930s depression was deepened and prolonged by massive government intervention on the part of both Republican and Democratic administrations.

* Popular myth blames unions or business for inflation by jacking up wages or prices arbitrarily. This is an effect, not a cause. inflation is the prerogative of the people in charge of the money supply.

* A "modern" gold standard would end inflation and the boom-bust business cycle. It would also preserve the value of the money we save. Paul's critics please note: He is not advocating a return to some previous version of the gold standard. He wants a monetary standard untainted by government intervention. If we want liberty and control of our lives, we need to take money out of the hands of government.

Ron Paul's book includes many relevant quotes to clarify his position and make the reading more interesting. Among those he cites are Jefferson, Jackson, Webster, Sennholz, Rothbard, Mises, Hayek, and especially the Keynes of 1919.

He takes issue with the author of the past century's most popular textbook on economics, Nobel laureate Paul Samuelson, who claimed the Fed was created over the objections of the bankers. But economic history tells us otherwise, Dr. Paul notes.. The Fed was in fact created by Wall Street's biggest bankers, Morgan, Rockefeller, and Kuhn-Loeb's man, Paul Warburg, in close cooperation with key government officials.

Ron Paul's book will not make the reader a monetary economist, but it will drive home enough common sense points about money to make him or her aware of the massive fraud that constitutes our money and banking system. I recommend Dr. Paul's book highly.

Lately, if you argue that we ought to return to the gold standard, most people will look at you like you're out of your mind. Unfortunately, most people don't really understand economics.

Read this book if:
- You aren't quite sure what the gold standard is or why we should do it, or if you've never really thought about the issue.
- You're absolutely convinced that the idea is crazy.
- You don't understand what's wrong with inflation or the effect it's having on you.
- You're concerned with the direction of the economy.
- You already believe in the gold standard and want to learn how to defend it better.
- You're a voter. The gold standard may be a big issue in the 2008 election. Plus, Ron Paul himself is running for President; if you're not familiar with him, this book is a great way to find out more about a lot of his positions on economics (I'd also recommend his "Mises and Austrian Economics," which I'm reading now, for that). If you haven't decided who you're going to vote for yet or are unsure as to exactly what you think about the gold standard, you owe it to yourself to read this book. It will certainly help you be an informed voter for this, and future, elections.
For that matter, I recommend this book to just about everyone. This book really helped me understand the issues better. This book avoids using too much economic jargon or getting too technical. It doesn't get bogged down in trivial details. It is concise enough that you can read it fairly quickly, but it is still packed with information. Even if you don't have much training in economics or the word "economics" puts you to sleep (if you had a boring econ professor in college) or gives you a panic attack (if you took econ and hated it), I'd urge you to read this book.

As a university-trained and licensed financial professional, I fully accepted the monetary status quo. Like most people, I probably would have never given the Federal Reserve System a second thought if I had not been drawn into libertarian political philosophy, based in large part by my appreciation for what I considered "the free market."

When I first encountered anti-Fed arguments, it did not make me abandon the views of the Wall Street Journal (to which I faithfully subscribed) or Kudlow & Company (which was set on "Season Pass" on my TiVo), but rather, I steadfastly defended the Fed in the face of largely baseless and inaccurate attacks by people who had watched Freedom to Fascism and skimmed through The Creature from Jekyll Island. These people were so irrational and so flat-out wrong, that I dismissed Ron Paul's monetary views as crankery and thought he was a good candidate "in spite" of his monetary views.

I doubt I ever would have read this book if not for the fact I was contracted to write a series of articles about gold and silver, one of which was to be about Ron Paul's monetary-policy views.

I read this book in one sitting and it was like a kick in the stomach. It is a very odd experience to realize that everything you believed was horribly wrong in a matter of two hours or so.

What makes this concise little book so excellent is that (1) it doesn't deal in conspiracy theories, and (2) it is backed up by solid free-market economic principles. Ron Paul's view at the time was to instate a gold-coin standard, but he was also open to free-market money and free banking. Now, he's pretty much dropped the former and instead argues exclusively for the latter. He never, as Aaron Russo does in Freedom to Fascism, advocates greater government (as opposed to Fed) control of the printing presses -- the nightmare scenario that's causing 12-million-percent inflation in Mugabe's Zimbabwe. This was my main hang-up when I was defending the Fed -- I thought the alternative was greater government control, which is what many of the right-wing conspiracy kooks advocate!

Secondly, this book -- in a little over 50 pages -- answers all of the objections to monetary gold that I had (and most university-brainwashed finance students will have), such as the ridiculous (I see now) idea that moderate inflation promotes economic growth and a stable money supply is deflationary. A third great thing about the book: It gives a very brief, but informative, history of money and banking in the United States.

The only negative thing I can say about the book is that Ron Paul's predictions at the time this was written, turned out to be way off. Thus, this book would be easily "discredited" by neocons and liberals and used to defend the inflationary system, since the ills Dr. Paul saw in the future did not come to pass in the 80's. But 2008 is a lot different from 1978, what with China and the euro and another thirty years of monetary expansion. I think Ron Paul will, sadly, be proved right in his dire predictions, even if his timing was off by three decades.

Though I am not what one would call
a 'gold bug', I have to admit that
Congressman Ron Paul is right about
the gold standard and what has hap-
pended to our manipulated dollar!

President Calvin Coolidge got rid of the Federal Reserve Bank because he AND our Forefathers, Benjamin Franklin, Thomas Jefferson, George Washington, ALL agreed that placing our ENTIRE economy in the hands of a few BANKERS is a VERY bad idea.

Well, faster forward to 2008 and here we are. The Federal Reserve and the families that control it run virtually our ENTIRE WORLD.

There are Federal Banks in EVERY developed nation and together they can manipulate the ENTIRE world's economy. WHY ISN'T ANYONE DOING ANYTHING!? Are we all so COMFORTABLE with our lives that we will just BLINDLY let them STEAL our RIGHTS? (Patriot Act, 'Undisclosed' Evidence, Indefinite Political Prison Sentences)

And there is talk that the U.N. Police are going to be able to enforce GLOBAL LAWS INSIDE AMERICA!!! Can you imagine the chaos that's going to cause? U.N. Police breaking down doors of Americans for doing things that aren't illegal in American but are considered illegal by the U.N.

Ron Paul is the only Politician who will even ADDRESS these issues. He is the ONLY voice of the people.

Ron Paul gets a touchdown with this book.
Inflation is a big problem in this country and Keynesian/Monetarism has done nothing but lead us down the wrong path.
This book is a good introduction to understanding why Gold truly is money.
Gold and Silver will always be honest money,political paper fiat money will not.
Honest money is needed in a free society.
The time for monetary action is now.
After reading this book check out the following for more detailed information.

"The Case for Gold: A Minority Report of the United State Gold Commission"
and "End the Fed".

Note about spamming:

It is interesting to see all the negative reviews on this book and actually if you click on reviewers profiles you can see that they are spamming Ron Paul books and they probably have not even read the books at all.It may even be the same guy doing the reviews.
Sad but some people are missing some really great information about our financial system no matter if you like Ron Paul or not.

Ron Paul won the appreciation (if not the votes) of many young people who liked his opposition to the Iraq War and his somewhat Libertarian take on the Republican party. But if "Gold, Peace, and Prosperity" is in any way typical of Paul's thinking, I would imagine most of these supporters would find him bewildering: Paul is in an esoteric crusade against paper money.

I'll oversimplify the matter thus: when issuing bullion (Gold, Silver, etc) currency, the government is limited by the supply of the underlying metal (In theory - in practice the limitation is not so great - governments can delute the expensive metal with a cheaper metal, thus increasing the amount of money they have). Governments paying with paper money can issue as much money as they would like; When they decide to abuse their power and issue too much money, the result is hyperinflation, as in Germany in the 1920s and Israel in the 1980s - prices increased by tenfold and more overnight, all stability in business is gone, and the economy suffers greatly. Even lower levels of abuses are harmful - the US in the 1970s suffered from double digit inflation, which was curved only via a recession induced by the Federal Reserve under Paul Volker. Indeed, the current economic crisis is partly a consequence of the Fed's easy money policy in the early 2000s, in which money flowed into real estate and created the housing bubble (but that was hardly the only reason - see Richard Posner's A Failure of Capitalism: The Crisis of '08 and the Descent into Depression).

Still, that paper money can be abused is hardly a reason to abstain from having it; Indeed, the very fact that monetary policy (increasing or decreasing the money supply) is so effective is a prima facie argument in favor of it - in the battle for economic growth, why give up an effective weapon?

Beyond cautionary tales, Ron Paul offers few reasons to think that giving up the control of money and going back to the Gold standard would be a good idea. Indeed, I could not believe that he would actually write that "Fifty years of systematic monetary destruction now threaten the existence of our constitutional republic". Quite the contrary - most democratic countries throughout the world use a floating currency (unpegged to any metal) , with no discernable cost to the body politic.

Sometimes, Paul tries to scare us with horror stories which, upon reflection, turn out to be not so horrific. Take the case of the Continental, the paper currency the United States has issued to pay for its war of Independence. Yes, the currency depreciated greatly; Much economic suffering followed; But need I remind the honorable member from Texas that there was a war going on? Hyperinflation is the least of the hardships of war; Given the Colonies' difficult positions (their government weak and inexperienced, their land invaded and often occupied by their enemy), inflationary financing of the war may have been the best way to do it. And even if the method of financing the war was inefficient, so what? Mistakes happen in war, and this could not have been a great one - in the end, the American side won.

Other arguments for Gold involve choice quotes from the likes of Andrew Jackson, Thomas Jefferson, and Daniel Webster. No disrespect is intended for these giants of American history, but for anyone who doesn't take their status as American deities to mean that they cannot ever be wrong, something more than the words of people who lived in an entire different era with entirely different conditions is necessary.

What Dr. Paul does not do is analyze the economic and political issues involved with the choice of using monetary rather than metal currency. As the experience of the 20th and early 21st century has demonstrated, there are good reasons to doubt democratic government would bring hyperinflation. For one, despite Paul's argument to the contrary (ex. p. 26, 31),inflation is usually against the interests of Bankers. They are, after all, creditors, and inflation reduces the real value of their loans. That is why the William Jenings Bryan (with his famous "Cross of Gold" speech) was supported by Mid American farmers and opposed by Eastern bankers. Bankers are only one of the powerful economic interests against inflation. High level of inflation, because it creates uncertainty, transfers wealth and complicates transactions, is extremely unpopular with the voters, and thus inflation-inducing governments usually get voted out of office. This is one of the main reasons behind the trend for Central Bank independence throughout the Western world in the past 30 years - governments realize that their long term survival in office depends on a stable economy.

Economic history teaches that the Power to manipulate the money supply is an extremely important one; Paul obscures this lesson with a confused and confusing account of the Great Depression. What actually happened (again, I am oversimplifying) is that the main world economies, having abandoned the Gold standard during the Great War, slowly adopted it again. Gold became more sought after, and thus the currencies appreciated. That meant deflation - a word that appears nowhere in "Gold, Peace and Prosperity". Deflation causes people to horde money and postpone spending, because they expect prices to fall. This leads to a vicious circle of lesser spending, higher deflation, and even less spending.

Although this is "ancient history", it is also very much like the situation we have today. The fall in prices and atmosphere of uncertainty creates too much saving and too little spending. With a metal currency, governments can do nothing - they can only spend the money they have. But with a paper currency, governments can intervene in the market and make up for the missing demand (spending). This is the reason the counriess which adopted the Gold standard in the 1920s abandoned it in the 1930s.

Paul believes that he has figured out the business cycle, blaming it on - you guessed it - the government, ignoring the fact that booms and busts existed in economies with far less government interference in the economy than ours, indeed, with governments which held to a gold standard (like the US in most of the 19th century).

Paul argues that under the alternative to the Gold standard "government, rather than the market, [is] planning the economy". But of course with a Gold standard, the market isn't planning anything. Gold is a natural resource; The quantity of Gold is a function of luck - how much of the metal there is or isn't in any mine, and how much it costs to extract it; Unless you believe that God supervises the amount of Gold that is extracted from the Earth, Gold based currency puts the planning of the economy in the hands of chance. Exposure to huge amounts of Gold raised havoc in the Iberian economy in the 16th century, and saved the US economy in the 1890s. This isn't economics, it's gambling (See Milton Friedman's Money Mischief: Episodes in Monetary History for a coherent and informed discussion of the issues raised by Dr. Paul).

The most one can say about "Gold, Peace, and Prosperity" is that it's neither long nor boring. Dr Paul is, however, wrong about history, economics and (surprisingly) political realities.