Dr. Ron Paul has published a new book this year, titled “Pillars of Prosperity: Free Markets, Honest Money, Private Property,” which contains an extensive compilation of his thoughts on economics and presents an excellent opportunity for a special book review. . This is the first installment of a longer review of the entire book, the full review of which will examine each individual part of the book and present a summary of the positions and arguments presented, which have sadly gone unrepresented to most Americans.” Part 5 – Money and Banking: Gold versus Fiat” is discussed here.
This part of the book is by far the longest, taking up almost half of the total content at nearly 200 pages. As such, it would be unlikely to do a full review of such a long section, so only a brief overview of some of the topics discussed will be presented. It is clear from the title that Ron Paul discusses his views on monetary policy, the banking system, and his preference for gold-backed stable money.
Many of the ills of big government are the direct result of our flawed monetary policy, according to Paul, which encourages the government and the people to spend more than they take in and to live beyond their means. Since politicians in Washington cannot finance through tax revenue all the welfare benefits and maintain the American Empire spread throughout the world, and cannot borrow enough abroad to make up the deficit, inflating the supply money through the Federal Reserve. the printer is connected. Therefore, one of the main ways that Paul recommends reducing inflation, shrinking the size of government, and preventing unnecessary wars is to decouple money and politics by deregulating the value and supply of money, and ending the security system. Federal Reserve manipulating interest rates and inflating the currency.
Inflation is not a free market problem. Only the government can make prices rise by diluting the money supply and printing more. When the government blames wealthy Arabs for rising fuel costs, unions or greedy employers, it is shifting the focus to the symptoms. The real cause of inflation, however, is in the government, since prices would generally fall in a free market economy. This problem, however, is not even recognized by politicians. When weaknesses appear in the economy, both the left and right sides of the aisle, instead of addressing the problem of government intervention, request that the Federal Reserve continue to inflate the money supply, at ever increasing rates. Combined with the fractional reserve banking system, which allows a bank to lend much more money than it has on deposit, this system greatly degrades the value of the dollar.
Paul cautions that this system cannot last forever, although the United States has so far done a remarkable job of keeping the paper money system running. However, this is more the result of collusion between the world’s central banks and US military might than a vote of confidence in the fiat currencies themselves. For decades, the government has been able to export its inflation by selling Treasury bills to foreign governments. Through this method, the banking system creates even more dollars that maintain the perception of wealth, even though Americans are producing less and living far beyond their means.
But even if foreign central banks slow down their purchases of US debt, the Federal Reserve is there to intervene. The Fed will increase its own purchase of government debt to prop up the dollar. Central banks also have currency arrangements whereby they can prop up or reduce the value of certain currencies of foreign nations, or try to reduce the price of gold. Supporting the dollar by helping the Federal Reserve and buying Treasuries is high on their priority list, due to the dollar’s status as the world’s reserve currency. However, keeping the price of gold low is even more important.
Concern about the price of gold and the manipulation of that price through the sale and lease of gold worries Pablo. He claims that the Fed and other central banks have thrown gold onto the market to keep its market price artificially low. Banks do this because a high gold price is a vote of “no confidence” in the paper system, which would lead more people to recognize the true weaknesses of fiat money. This is an understanding that central banks would prefer people not to have, as they would lose their ability to control the wealth of countries.
It is this currency manipulation that seems to concern Paul the most. Besides the fact that the Constitution did not give Congress the authority to create a central bank to print paper money, Congress goes even further. He ignores his responsibility, laid out in the Constitution, to maintain a sound monetary system. First, the Federal Reserve is not audited and only provides information to Congress on its own terms, including discontinuing the release of important economic figures. The Government Accountability Office is prohibited from auditing the Fed, due to its independence from politics. However, Paul asserts that this independence is nothing more than a legal fiction, and Congress should not ignore its responsibility to provide constitutional money and a free market. The Fed promotes the opposite of both.
Another non-governmental agency that Paul criticizes is the International Monetary Fund, for its gold sales and the fact that it is an international welfare agency financed by American taxpayers. Due to its nature as a foreign aid vehicle providing money to Third World nations whose dictators steal the money and whose people will never be able to repay the loans, Paul believes it should be under the control of Congress. Especially since the IMF has gold reserves that it could sell, but instead asks the US government for money, its independence and usefulness are highly questionable.
How did the dollar become the world’s reserve currency, giving the US government a license to print money, inflate the currency, provide welfare for individuals, foreign governments and corporations, and maintain a world empire? Paul sees the beginnings of the system appearing in the early part of the 20th century with dollar diplomacy. After World War II, when the dollar became the basis of the international standard of exchange for gold, it became the world’s reserve currency of choice. When the US defaulted on its gold payments in 1971, it managed to persuade Saudi Arabia and OPEC to price oil solely in dollars. This contributed to the promotion of the hegemony of the dollar, since there was a worldwide demand for dollars to buy oil. In addition, foreign producing countries, wishing to sell their products in wealthy American markets, received dollars for their products, further spreading the currency.
The overwhelming military might of the United States should also not be overlooked, according to the book. The system created an artificial demand for the dollar, which had been “as good as gold” until 1971, and was then backed by oil sales. But the real backer of the dollar is the military, which allows the United States to run its empire without saving money or producing goods.
As mentioned above, this is just a brief overview of some of the issues that Paul discusses in this section of the book. Just a few others worth mentioning include an extensive defense of the gold standard that makes its case against the most common positions of opponents of the system, the impossibility of monopolies in a free market, the uselessness of the CPI and PPI indicators to measure strength from the market and how much money has been spent on welfare, but which has resulted in more homelessness than ever before. Some of his interactions with Federal Reserve Chairman Alan Greenspan are also transcribed, clearly indicating the futility of asking government bureaucrats a question, as they will only find callous answers on technical points of difference, rather than addressing the substance of the argument. However, the general concern for stable money and free markets, and the arguments against fiat currency, the fractional reserve banking system, permeates all of Dr. Paul’s selections in this part of the book and prepares the reader for the final sections.
