Gold, Peace, and Prosperity

The Birth of a New Currency

Ron Paul

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[15] Impending Social Strife?


The greatest threat facing middle and working class Americans is our depreciating paper currency.


At least when the kings of old debased their coinage, by adding copper to the precious metal, there was still some objective value to the resulting money.1  But as economist David Ricardo observed almost two centuries ago, when money costs nothing, it will become worth nothing.2


“Government,” said Ludwig von Mises, “is the only agency that can take a useful commodity like paper, slap some ink on it, and make it totally worthless.”3


Today, thanks to 67 years of central bank control over the money supply, we face an economic and political crisis greater than any we have faced before.


We probably will see widespread civil disorder in the 1980s, as a direct result of our faltering economic system.  The dollar has been damaged by decades of interventionism, and Congress has legitimized depreciation of the dollar and forced redistribution of wealth through corporate and social welfare schemes.


All aspects of the interventionist system threaten freedom and social peace, but money is the major issue, since it is the lifeblood of all economic transactions.  If we are to reverse the trends of the past six or seven decades, honest money and monetary debasement must become top concerns of ordinary Americans.


The late Martin Gilbert, head economist for a Swiss bank, was a convert to the gold standard.  Among his employees was a young manual worker.  “Once a month,” said Gilbert, “he took part of his pay and bought a gold coin for his wife.  I remonstrated with him about it once, and he said, ‘Look, don’t you Americans come over here and try to tell us how to live.  I go [16] home and I give that coin to my wife, and I tell her, “If something happens to me, and to the bank and all the governments, you can go into the countryside and give it to a farmer, and with that coin you can eat for a week.” ’  I came around to the opinion that he knew something I didn’t know.”

Back to Acknowledgements

Forward to Chapter Two


1 A.S.P. — Technically this is wrong.  All value is subjective, and that includes the valuation of hard money.  What is objective is (1) the fact that there is only so much gold on the Earth, as well as (2) its weight on the Earth.

2 A.S.P. — It’s interesting that Paul cites this observation as Ricardo’s, as Ricardo was a proponent of Smith’s labour theory of value.  Today, economists typically adhere to the subjective theory of value—and, indeed, some subjectivism can be found in Ricardo’s work.  I however have been unable to locate any source where Ricardo directly makes this point, but that may perhaps matter little when one considers that the point attributed is necessarily true regardless of whether one adopts Ricardo’s labour theory or Paul’s subjective theory.  Ricardo writes that “if the value of money were to fall, the price of every commodity would rise, for each of the competitors would be willing to spend more money than before on its purchase; but though its price rose 10 or 20 per cent if no more were bought than before, it would not, I apprehend, be admissible to say, that the variation in the price of the commodity was caused by the increased demand for it.  Its natural price, its money cost of production, would be really altered by the altered value of money; and without any increase of demand, the price of the commodity would be naturally adjusted to that new value.”  See David Ricardo, On the Principles of Political Economy and Taxation 3rd ed. (London: John Murray, 1821), p. 461, § 30.4.

3 A.S.P. — I’ve been completely unable to find an original source where Mises said this.  And, as Jeffrey Tucker correctly points out, it doesn’t sound like Mises’s style of writing.  Tucker writes, “It’s clever but lacks the precision of Mises.”

Copyright © 1981 by the Foundation for Rational Economics and Education, Inc., Post Office Box 1776, Lake Jackson, Texas 77566.

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