Good as Gold: How to Unleash the Power of Sound Money by Dr. Judy Shelton
Summary and takeaways from the book.
Keywords:
Deep State
Golden Age
Capitalism
Socialism
Wealth Transfer
Money
Jan 23, 2025
The book is about "How to unleash the power of Sound Money". Sound Money is money (currency) backed by a scarce asset so that it cannot be created out of thin air by government.
There are many books that show sound money is essential for our prosperity.
What makes this book unique is that it shows one way USA can restore confidence in US Dollar at time of crisis.
ISBN: 978-1598133899
Published: October 8, 2024
Pages: 240 amazon
The author Dr. Judy Shelton specializes in global finance and monetary issues. She is a Senior Fellow at the Independent Institute and Former Chairman of the National Endowment for Democracy.
The book is about "How to unleash the power of Sound Money". Sound Money is money (currency) backed by a scarce asset so that it cannot be created out of thin air by government.
There are many books that show sound money is essential for our prosperity.
What makes this book unique is that it shows one way USA can restore confidence in US Dollar at time of crisis.
"Gold and economic freedom are inseparable."
- Alan Greenspan, former Chariman of the US Federal Reserve.
Current System
"As Jacques de Larosiere, the distinguished former managing director of the International Monetary Fund, noted in 2014, "If one reflects on the monetary setting of those last fifteen or twenty years, one cannot just say that it amounted to a 'non-system'.
It was actually much worse: It amounted to an 'anti-system'."
Stealing in the name of Social Justice
"Social justice and equality could be obtained only by granting power to the state to expropriate personal holdings, which could then be redirected toward serving the interests of the proletariat and peasant classes."
Stagnating economy
The author gives example of economy of Soviet Union.
"Stagnation was wreaking havoc with the government's internal budget as productive output languished; at the same time, increasing levels of rubles were distributed to appease disgruntled citizens."
No Bretton Woods 3
"There are reasons not to resurrect the Bretton Woods system as it was originally structured, with its singular reliance on the United States to maintain stable exchange rates among participating nations."
It is unlikely there will be a formal or official Bretton Woods 3 similar to the US led Bretton Woods in 1944. There will be no 'table talks'. This is because all States will just Gold as settlement currency.
How to bring back Gold
The author lays out a vision for bringing back Gold as centrepiece of US Dollar and global monetary system.
First step is building consensus by exposing the problems with the current system. Central monetary or fiscal planning does not work. Sound Money is critical for prosperity.
Second step is implementing a new system. This requires a crisis and leadership.
Dangers of planned central economy
"When government officials presume that they can make better decisions on behalf of citizens than those individuals can make for themselves - following their own hearts and minds - the result is to thwart individuals from seeking to achieve their personal dreams. Instead, they are transformed into wards of the state.
The double whammy of central Search planning, then, is that it proves both inefficient and inimical to individual liberty. It's hard to imagine two outcomes more at odds with American values."
"Monetary favoritism is the unspoken consequence of activist central bank intervention."
"Ultra-low rates fundamentally eviscerate the ability of all but the wealthy to gain an economic toehold; instead, they lead investors to drive up equity and other asset prices to achieve their return-on-investment objectives, but average Americans hold little, if any, stock or investment instruments. Instead, they save what they can in bank accounts.
The rates on these have been so low for so long that these thrifty, prudent households have in fact set themselves back with each dollar they save."
- Karen Petrou, 'The Engine of Inequality: The Fed and the Future of Wealth in America'
To summarize, the dangers of Central monetary or fiscal planning are:
citizens become wards of the State and are disempowered
it is inefficient and anti-liberty
it leads to Monetary favoritism
it is anti-meritocratic
it makes average savers poorer and makes asset owners richer
it is against American values
The author also quotes paper by Charles Kadlec where he argues that Gold Standard is better at managing the economy than the "Governing Elite".
Charles Kadlec in his paper claims that:
"Economic growth is a full percentage point slower, with an average annual increase in real per-capita GDP of only 1.8% World inflation of 4.8% a year is 1.5 percentage point higher;
Downturns for the median countries have more than tripled to 13% of the total period;
The number of banking crises per year has soared to 2.6 per year, compared to only one every ten years under Bretton Woods;".
Has the world stayed on the Gold Standard, "...the average person’s real income would be nearly 50% higher, the increase in prices would be nearly 50% lower..."
Charles Kadlec in his paper talks about Friedrich Hayek's "fatal conceit". This false (fatal) belief that "wise men and women can and should manage the world economy, if only given the proper information and tools."
Friedrich Hayek, Charles Kadlec, and the Bank of England Financial Stability Paper showed this is not true.
A Gold Standard does a better job of managing the worlds economy than the "Governing Elite".
The Gold Standard
The author gives overview of what a Gold Standard is:
It is an international monetary order rather than a system.
Fix price between Gold and domestic currency e.g. a certain US$ for 1 ounce of Gold.
No restrictions on export of Gold or movement of capital across countries by private citizens.
Gold backed currency. This does not need to be 100%. 40-70% of currency can be backed by Gold.
Private or national bank notes
Gold Standard imposes monetary discipline on all.
"The role of government in such an arrangement is to not disrupt the self-correcting mechanism of the gold standard through central bank intervention.
Indeed, as Greenspan noted, a central bank isn't necessary for a gold standard; a central bank could even be seen as detrimental, to the extent that it undermined the self-correcting characteristics of a gold standard."
At international level, "Under the gold standard, every nation was required to maintain convertibility of its national currency into gold at a fixed rate. The system was self-enforcing because countries had the incentive to maintain convertibility."
Another option was for countries to link their currencies to other currencies that are convertible to Gold. This is efficient as the country does not need to have Gold. The author gives examples of India linking its currency to British Pound Sterling.
"Keynes thought that paper money was not only more efficient than gold coins but also more flexible, allowing the volume of currency to be temporarily expanded to accommodate seasonal demands of trade. Rather than having every nation maintain reserves in gold to back its currency, Keynes believed it made more sense for India and other countries to guarantee convertibility of their money into sterling, which functioned as an international currency, and keep reserves in London in the form of sterling balances on which they were paid interest."
This is "Gold Exchange Standard" instead of "Gold Standard".
Keynes believed that "Gold Exchange Standard" was more efficient than "Gold Standard" and an option for smaller or emerging countries without reserves of Gold.
The Gold Standard at time of War
More money is required at time of war. Governments print money to finance war. A State with sound currency 40% backed by Gold will be able to print more. Once the war is over, the excess currency will lead to inflation. The inflation can then be slowly reduced by withdrawing currency.
* * *
The author argues that USA cannot fully move to Gold Backed Currency as there is not enough Gold. USA only has enough Gold to back $700 billion of its currency.
The author ends with suggestion that USA can offer a 5, 20, 25, 50 year treasury bond backed by and convertible to Gold. The bonds will offer no interest but will be as good as Gold on maturity.
The purpose of these Gold Treasury Bonds will be to restore confidence in US Dollar in crisis.
"The issuance of Treasury Trust Bonds would link the dollar to gold for those investors willing to lend money to the U.S. government on a long-term basis—perhaps as long as fifty years-but who want the security of knowing their investment will be paid off at maturity either in dollars or the promised amount of gold."
ISBN: 979-8301510427
Published: November 27, 2024
Pages: 187
Available on: amazon
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