Books in Brief: The Case for Gold

The Case for Gold, by Representative Ron Paul and Lewis Lehrman (Cato Institute, 227 pp., $8.95). The nation’s money stock has been increased more than tenfold in the past forty years. And for forty years inflation has ravaged the dollar, distorted business calculations, reduced the value of pensions and savings, redistributed wealth, and engendered social conflicts. Few people see the connection, but Lewis Lehrman and Congressman Ron Paul make it clear in The Case for Gold. Any increase in the quantity of money does not go to all people at the same time, and does not raise all prices uniformly. Rather, some people get the new money first. These people can bid more for goods and services, and thus tend to raise the prices other people must pay. The first recipients of the new money are the short-run beneficiaries of inflation. But everyone else, who must pay higher prices, loses. And in the long run we all lose. Increases in the quantity of money and credit distort relative prices and mislead businessmen into projects that cannot be sustained when monetary policy is tightened. Long-range planning becomes chancier, as the business climate grows increasingly dependent on Washington politics. Taxes on inflation-generated capital gains and inventory profits, and skimpy depreciation allowances, lead to capital consumption. Savers avoid risky capital investments and flee into Treasury bills, precious metals, and collectibles—which contribute nothing to productive output. Is there any way to bring inflation to a permanent end? Paul and Lehrman opt for competing currencies: repeal legal-tender laws, tie the dollar to gold, permit private coinage, and abolish the Federal Reserve. Politically radical, but economically very wise.

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Brian Summers

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The Case for Gold, by Representative Ron Paul and Lewis Lehrman (Cato Institute, 227 pp., $8.95). The nation’s money stock has been increased more than tenfold in the past forty years. And for forty years inflation has ravaged the dollar, distorted business calculations, reduced the value of pensions and savings, redistributed wealth, and engendered social conflicts. Few people see the connection, but Lewis Lehrman and Congressman Ron Paul make it clear in The Case for Gold. Any increase in the quantity of money does not go to all people at the same time, and does not raise all prices uniformly. Rather, some people get the new money first. These people can bid more for goods and services, and thus tend to raise the prices other people must pay. The first recipients of the new money are the short-run beneficiaries of inflation. But everyone else, who must pay higher prices, loses. And in the long run we all lose. Increases in the quantity of money and credit distort relative prices and mislead businessmen into projects that cannot be sustained when monetary policy is tightened. Long-range planning becomes chancier, as the business climate grows increasingly dependent on Washington politics. Taxes on inflation-generated capital gains and inventory profits, and skimpy depreciation allowances, lead to capital consumption. Savers avoid risky capital investments and flee into Treasury bills, precious metals, and collectibles—which contribute nothing to productive output. Is there any way to bring inflation to a permanent end? Paul and Lehrman opt for competing currencies: repeal legal-tender laws, tie the dollar to gold, permit private coinage, and abolish the Federal Reserve. Politically radical, but economically very wise.