Review of Gold: The Once and Future Money (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.



Click Here to see more reviews about: Gold: The Once and Future Money (Hardcover)