Books by Lehrman, Lewis E.

Lehrman, Lewis E. The True Gold Standard. Greenwich, CT: Lehrman Institute, 2011. ISBN 978-0-9840178-0-5.
Nothing is more obvious than that the global financial system is headed for an inevitable crack-up of epic proportions. Fiat (paper) money systems usually last about forty years before imploding in the collapse of the credit expansion bubbles they predictably create. We are now 41 years after the United States broke the link between the world's reserve currency, the U.S. dollar, and gold. Since then, every currency in the world has been “floating”—decoupled from any physical backing, and valued only by comparison with the others. Uniquely in human history, all of the world now uses paper money, and they are all interlinked in a global market where shifts in sentiment or confidence can cause trillion dollar excursions in the wealth of nations in milliseconds. The risk of “contagion”, where loss of confidence in one paper currency causes a rush to the next, followed by attempts to limit its appreciation by its issuer, and a cascading race to the bottom has never been greater. The great currency and societal collapses of the past, while seeming apocalyptic to those living through them, were local; the next one is likely to be all-encompassing, with consequences which are difficult to imagine without venturing into speculative fiction.

I believe the only way to avoid this cataclysm is to get rid of all of the debt which can never be repaid and promises which can never be met, pop the credit bubble, and replace the funny money upon which the entire delusional system is based with the one standard which has stood the test of millennia: gold. If you were designing a simulation for people to live in and wanted to provide an ideal form of money, it would be hard to come up with something better than element 79. It doesn't corrode or degrade absent exposure to substances so foul as to make even thrill-seeking chemists recoil; it's easily divisible into quantities as small as one wishes, easy to certify as genuine; and has few applications which consume it, which means that the above-ground supply is essentially constant. It is also very difficult and costly to mine, which means that the supply grows almost precisely in synchronism with that of the world's population and their wealth—consequently, as a monetary standard it supports a stable price level, incapable of manipulation by politicians, bankers, or other criminal classes, and is freely exchangeable by free people everywhere without the constraints imposed by the slavers upon users of their currencies.

Now, when one discusses the gold standard, there is a standard litany of objections from those bought in to the status quo.

  • It's a step back into the past.
  • There isn't enough gold to go around.
  • It's inflexible and unable to cope with today's dynamic economy.
  • There's no way to get from here to there.

This book dispenses with these arguments in order. If we step back from the abyss of a financial cataclysm into a past with stable prices, global free trade, and the ability to make long-term investments which benefitted everybody, what's so bad about that? It doesn't matter how much gold there is—all that matters is that the quantity doesn't change at the whim of politicians: existing currencies will have to be revalued against gold, but the process of doing so will write down unpayable debts and restore solvency to the international financial system. A gold standard is inflexible by design: that's its essential feature, not a bug. Flexibility in a modern economy is provided by the myriad means of extension of credit, all of which will be anchored to reality by a stable unit of exchange. Finally, this work provides a roadmap for getting from here to there, with a period of price discovery preceding full convertibility of paper money to gold and the possibility of the implementation of convertibility being done either by a single country (creating a competitive advantage for its currency) or by a group of issuers of currencies working together. The author assumes the first currency to link to gold will be called the dollar, but I'll give equal odds it will be called the dinar, yuan, or rouble. It is difficult to get from here to there, but one must never forget the advantage that accrues to he who gets there first.

The assumption throughout is that the transition from the present paper money system to gold-backed currencies is continuous. While this is an outcome much to be preferred, I think it is, given the profligate nature of the ruling classes and their willingness to postpone any difficult decisions even to buy a mere week or two, not the way to bet. Still, even if we find ourselves crawling from the wreckage of a profoundly corrupt international financial system, this small book provides an excellent roadmap for rebuilding a moral, equitable, and sustainable system which will last for five decades or so…until the slavers win office again.

This is a plan which assumes existing institutions more or less stay in place, and that government retains its power to mandate currency at gunpoint. A softer path to hard currency might simply be allowing competing currencies, all exempt from tax upon conversion, to be used in transactions, contracts, and financial instruments. I might choose to use grammes of gold; you may prefer Euros; my neighbour may opt for Saudi certificates redeemable in barrels of crude oil; and the newleyweds down the street may go for Iowa coins exchangeable for a bushel of corn. The more the better! They'll all be seamlessly exchangeable for one another at market rates when we beam them to one another with our mobile phones or make payments, and the best ones will endure. The only losers will be archaic institutions like central banks, governments, and their treasuries. The winners will be people who created the wealth and are empowered to store and exchange it as they wish.

July 2012 Permalink