Currency Laos

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Forgetting Sound Money

The Fateful Day

On 15 August 1971, Richard Nixon severed the dollar's link to gold and destroyed Bretton Woods, the world's monetary system. For three centuries before 1971, the world more or less had stable money. After a series of steps in the 1960s and early 1970s and ending on 15 August 1971, it no longer did. The capitalist economy long before the Industrial Revolution was based on stable money. Both the advocates of laissez-faire and their critics, the socialist and communists, agreed on the necessity of a sound unit of money. Lewis continues stating, "Floating currencies [however] are not a phenomenon of the free market but the market's inevitable reaction to unceasing currency manipulations by world governments."

This system of floating currencies is the exception to the rule in world monetary history. With history as a guide, we may find a solution to today's monetary crisis. Governments have manipulated money and had floating currencies long before Christ, and people eventually demanded a return to sound money. Alexander the Great unified his empire under a hard silver coinage. Julius Caesar, Napoleon, Washington and Hamilton, Lenin, and even Mao returned their respective countries to a gold standard after, in many cases, suffering a period of hyperinflation. Nixon, however, gets credit for ending the dollars link to gold and leading the world into monetary chaos. Ronald Reagan came close to returning the dollar to the gold standard in the 1980s, but settled instead for an end to the devaluation policies of the 1970s. Bill Clinton abandoned his party's cheap dollar policies of the twentieth century, and the voters forgave his other escapades.

Throughout history, including three times (or five depending on how you count) in America's past, unstable currencies have been stabilized. Today's situation is not unique, though the challenges are great for politicians, governments and the people. What is unique, however, is the current situation. Since 1971, all world's currencies are floating simultaneously. The world community will need a leader with vision and determination to lead it to a stable monetary system backed by gold. It may not be the dollar. Just as the dollar backed by gold replaced the British pound after it broke with gold in 1914 and again in 1931, so could another currency replace today's failing dollar.

Classical or Neo-Keynesian Economics?

Nathan Lewis writes in Gold: The Once And Future Money from a classical economics standpoint instead of the conventional neo-Keynesianism common today's within the media and political establishment. As Classical economics is the economics of the Industrial Revolution and capitalism, so neo-Keynesian economics, that is "neo-mercantilism," is the economics of absolute monarchy and despotism.

Echoes of classical economics are found in the writings of Confucius, Mencius, and Lao-Tzu. Adam Smith, David Ricardo, and John Stuart Mill, as well as Karl Marx, were classical economists. Later, in the late nineteenth century, thinkers such as William Stanley Jevons, Carl Menger, and Léon Walras continued the thread of classical economic scholarship. In the early twentieth century the Austrian School under the leadership of Ludwig von Mises and Friedrich von Hayek developed a classical monetary theory with Murray Rothbard and Henry Hazlitt carrying the developments into the later half of the twentieth century.

Classical economics is centuries old. However, in todays world it seems unorthodox and is forgotten by most academics and monetary authorities. Yet its theoretical structure produced centuries of stable money and economic prosperity. "It has been tested and it works," says Lewis. Today's "experts," confused by today's conventional wisdom, may not get it or know what to do, but the knowledge and wisdom of the past can guide us back to monetary stability and sanity, if we only take the time to learn.

Based on GOLD: The Once and Future Money by Nathan Lewis

About the Author

David Singhiser

Orthodox Christian, Libertarian, World Traveler, Writer, Sovereign Individual, Sangría Drinker, Former Spanish Teacher, A Psychologically Unemployable Vagabond you can follow on his blog at: Libertas.ws, and watch his videos at: Libertas Videos

"Laos" Adrian.gfc's photos around Vientiane, Lao Peoples Dem Rep (laos wildwater vang vieng)


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