December 24, 2008
While rummaging through the annals of Reasonoid criticism of Ron Paul, I discovered an interesting paragraph from Dave Weigel?s review of The Revolution that?s worth looking at in detail. Weigel, who maintains a consistent sarcastic and dismissive tone throughout, brings his essay to a close with this howler:
Paul never sounds as certain as when he gets to link [his critique of government] to monetary policy. He’s rarely less convincing. Paul sees a direct link between central banking, fiat currency, and the economic crises that he argues wreck the average American’s prosperity and empower thugs. A financial collapse, he prophesies, ?becomes more likely every day.?
Yes, if libertarians want to be relevant, they need to drop all that crazy talk about a coming ?financial collapse.? That could never happen in America.
What comes next brought me back to my days as a history TA. Weigel argues that we should be happy with our current fiat money system (that is, one lacking in metallic convertibility) because,
[t]he 19th century’s booms and busts were far more damaging to livelihoods and to economic systems than anything in the fiat money era. They provided much steadier footing for radical movements. Paul’s overheated worry about a Weimar Republic-style collapse kicks the legs out from underneath the argument.
Weigel strangely cites evidence that refutes his own argument. First off, while, yes, every century had booms and busts, the 19th century never had anything resembling the 16-year Great Depression or the decade-long stagflation of the 1970s, both of which occurred after a U.S. president de-linked the dollar with gold. Moreover, reading that last sentence, one gets the impression that Weigel thinks the Weimar Republic took place in the 19th century and/or that its economic problems were caused by its strict adherence to the gold standard. Needless to say, both are false. All those scenes of Germans’ taking wheel barrows of marks into restaurants and loaves of breed being priced at 3 billion are images of a fiat currency pushed to its extreme limit (or perhaps inevitable end), when, in Weimar?s case, the Reichsbank was simply printing more and more paper to pay off its Versailles Treaty obligations. And it was this destruction of value that ?provided steady footing for radical movements,” including the NSDAP. The Bolsheviks, too, arose after the fiat ruble was going through catastrophic inflation; Lenin, in turn, returned Russia to relative stability in 1924 by re-linking the rubble to gold as part of his so-called New Economic Policy. Yes, Lenin was a gold bug. But that?s all history.
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