All Commentary
Wednesday, July 1, 1981

Book Review: Gold, Peace, and Prosperity: The Birth of a New Currency by Congressman Ron Paul

(The Foundation for Rational Economics and Education, Inc., P.O. Box 1776, Lake Jackson, Texas 77566), 1981
55 pages • $5.00 paperback

Efforts to restore a gold standard are gaining momentum. The 1934 prohibition of the private ownership of gold was repealed in 1974. Three years later, gold clause contracts were legalized. In 1979, a bill to revoke the Treasury’s power to seize privately held gold passed in the House of Representatives. And, in 1980, both Houses of Congress approved an amendment to establish a gold commission, which will examine the role of gold in monetary affairs.

The sponsor of the successful gold commission amendment was Congressman Ron Paul of Texas. He is one of the leaders of the effort to establish a redeemable gold dollar and will serve on the commission along with public and private sector representatives. In an effort to clarify the issues involved and add some historical insights to the current debate, Congressman Paul has written a booklet that is clear, elemental, and enlightening. As he demonstrates, “The consequences of monetary destruction are complex, but the solution is not.”

Congressman Paul outlines the steps that must be taken to move from a government fiat money system which is headed toward disaster, to a system of honest, free market money. He also refutes some of the commonly raised objections to a gold standard. One such assertion is that there is not enough gold to return to a 100% redeemable-in-gold dollar. Dr. Paul quotes Professor Hans Sennholz: “In a free market economy it is utterly irrelevant what the total stock of money should be. Any given quantity renders the full services and yields the maximum utility of a medium of exchange . . . . When the stock is relatively large, the purchasing power of individual units of money will be relatively small. Conversely, when the stock is small, the purchasing power of the individual units will be relatively large. No wealth can be created and no economic growth can be achieved by changing the quantity of the medium of exchange. It is so obvious and yet so obscured by the specious reasoning of special interest spokesmen that the printing of another ton of paper money does not create new wealth.”

Inflation is an increase in the quantity of money. It is legalized theft by a means similar to counterfeiting. A small increase in the quantity of money, even if intended to just match the increase in productivity or the economic growth rate “inevitably introduces malinvestment as those getting the new money put it to uses that only later recessions show to have been unproductive.” Free market competition in money gives the people, not the politicians, power over the monetary system. It is “a free people’s ultimate protection from spendthrift and untrustworthy government.”

As this booklet makes clear, “[t]he road to monetary destruction has been long and circuitous, but we are coming to the end of it. Sixty-seven years of central banking have brought us to the edge of depression and hyperinflation . . . . [However, the] alternative to today’s monetary fraud and tomorrow’s chaos is readily available to us . . . . The spirit of freedom, and the desire for honest money, still run strongly among our people.”

History provides many examples of governments of all types destroying the monetary unit through uncontrolled inflation. History also teaches that the only means yet discovered to harness the natural tendency of governments to debase the currency is a monetary system which is backed by a commodity. Over the centuries, countless societies have selected gold as that commodity. However, the particular commodity chosen is of little importance provided the decision is the result of an unhampered market process.

Congressman Paul’s efforts to further the consideration of a new currency are crucial because as this booklet reveals, freedom cannot long exist without honest money.

  • Roger Ream is president of The Fund for American Studies.