Writing today for Forbes, the economist, fund manager, and author
Nathan Lewis proves that Harry Truman was right about gold as well as
everything else insofar as "the only thing new in the world is the
history you don't know."
In an essay headlined "The 10-Minute Gold Standard: It's Much
Easier than You Think" --
-- Lewis quotes the classical economists David Ricardo and John Stuart
Mill to argue that, theoretically, at least, a gold standard for currency can
be maintained very simply without convertibility or any gold reserves at all
if issuance of the currency is tightly controlled.
Quoting Ricardo from 1817: "It will be seen that it is not
necessary that the paper money should be payable in specie to secure its
value; it is only necessary that its quantity should be regulated according
to the value of the metal which is declared to be the standard."
And quoting Mill from 1848: "If, therefore, the issue of inconvertible
paper were subjected to strict rules, one rule being that whenever bullion
rose above the Mint price, the issues should he contracted until the market
price of bullion and the Mint price were again in accordance, such a currency
would not be subject to any of the evils usually deemed inherent in an
But elaborating way back then, 165 years ago, Mill foresaw Western
central banking's gold price suppression scheme, which is almost as old as
gold money itself. He warned against "the possibility of fraudulent
tampering with the price of bullion for the sake of acting on the currency;
in the manner of the fictitious sales of corn, to influence the averages, so
much and so justly complained of while the Corn Laws were in force."
"Fictitious sales" -- maybe like shorting of gold
backstopped by central banks?
Lewis quotes Mill's conclusion: "There is therefore a great
preponderance of reasons in favour of a convertible
in preference to even the best-regulated inconvertible currency. The
temptation to over-issue, in certain financial emergencies, is so strong that
nothing is admissible which can tend, in however slight a degree, to weaken
the barriers that restrain it."
Or as a high school graduate remarked at GATA's Washington conference
in 2008 (http://www.gata.org/node/6242):
"The problem with central banking has been mainly the old problem
of power -- it corrupts.
"Central bankers are supposed to be more capable of restraint
than ordinary politicians, and maybe some are, but they are not always or
even often capable of the necessary restraint. One market intervention
encourages another and another and increases the political pressure to keep
intervening to benefit special interests rather than the general interest --
to benefit especially the financial interests, the banking and investment
banking industries. These interventions, subsidies to special interests,
increasingly are needed to prevent the previous imbalances from imploding.
"And so we have come to an era of daily market interventions by
central banks -- so much so that the main purpose of central banking now
is to prevent ordinary markets from happening at all.
"Central banking controls the value of all labor, services, and
real goods, and yet it is conducted almost entirely in secret -- because, in
choosing winners and losers in the economy, advancing infinite amounts of
money to some participants in the markets but not to others, administering
the ultimate patronage, central banking cannot survive scrutiny.
"Yet the secrecy of central banking now is taken for granted even
in nominally democratic countries."
While GATA is proud of the work it has done over the last 14 years in
documenting and publicizing the modern gold price suppression scheme of the
Western central banks --
-- essentially we have done no more than prove a largely forgotten
tautology, prove that the sun rises in the east, even if our work has been
made more difficult by the craven disinformation of some of the gold
industry's own supposed analysts and the determined irrelevance of the gold
industry's own supposed representative, the World Gold Council.
Other than perhaps the memoir of the late Swiss gold banker Ferdinand
Lips, "Gold Wars: The Battle Against Sound Money as Seen from a Swiss
Perspective," published in 2001 shortly after GATA began its work --
-- there doesn't seem to be any formal monetary history examining
central banking's war against gold, grateful as we may be for the chronology
of the modern gold war assembled by the publisher of The Privateer
newsletter, the Australian William Buckler:
It's not as if some leading economists don't know about gold's centrality
in the world financial system. As a professor of economics at Harvard
University before becoming deputy U.S. Treasury secretary and then secretary,
Lawrence Summers wrote an academic study about it in 1988 but then, once in
office, seems never again to have mentioned gold in public, lest attention be
called to the surreptitious market intervention in which his administration
was so heavily involved:
For this gold stuff, as that high school graduate remarked five years
ago, having tripped over it by accident, undeservingly, is the secret
knowledge of the universe, more powerful and more sensitive to governments
than nuclear weapons, and thus, in the defense of liberty, it requires urgent
democratizing and archiving where it might not be quite so forgotten again.