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 