"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, men become the tools of men. Blood, whips, and guns - or gold. Take your choice - there is no other - and your time is running out." - Ayn Rand
Douglas Gnazzo's 2008 book, Honest Money: A History of United States Gold and Silver Currency (.pdf), is an essential add to the reading list of any serious student of monetary systems. Far shorter than the massive tome of Edwin Vieira's hopefully-soon-to-be-reprinted Pieces of Eight at 226 pages, Gnazzo takes the reader on a pleasurable blitzkrieg through our country's rich monetary history, from the founders and the Constitution to modern times. Perhaps the most enthralling section of the book is the closing chapters where Gnazzo gives his thoughts on a future commodity-based currency and, more importantly, how to transition there from where we are now. Like myself, Gnazzo has called for a national debate on the subject before it is too late.
Gnazzo splashes all the colors of the truth on the wall for his readers. He relates how our money was slowly debased by the politicians' wars and those pesky central bankers who weeviled their way back into power after America's first two central banks were destroyed. He relates how the destructive virus of public debt was sown in during the founding of our country chiefly by Alexander Hamilton, the Revolutionary war hero and mercantilistic servant of the aristocracy in America.
With patience, Gnazzo carefully explains the legal differences between currency, bills of credit, lawful money (still coins of gold and silver per the Constitution to this very day), and the public debt. He relates how Hamilton, as Secretary of the Treasury, deliberately confused the bills of credit and public debt with lawful money, a distinction that should never have been made.
The key points he lists to remember when dealing with the national debt are:
- Federal Reserve Notes (bills of credit) circulate as currency by "fiat," or decree
- Federal Reserve Notes are secured by U.S. Treasury Bonds (also bills of credit)
- Federal Reserve Notes "pay off" U.S. T-Bond principle & interest
His accurate conclusion? It is "all one big circular game of musical chairs." Gnazzo is also quite the philosopher, and just one of the many insights I took from his book was the subject of this article "What is Wealth?"
Honest Money is available here in both PDF and audio book formats. I don't wish to delve too deeply into the book, but I will say I have read a lot of literature on monetary systems over the past year, from Adam Smith's Wealth of Nations, Thomas Paine, the 1894 Coin's Financial School from the silver Populist movement, to plenty of more modern authors like Rothbard's critical works, Cleon Skousen, Milton Friedman, Antal Fekete, the Bill Bonner crew, Ferdinand Lips and Gary North. Gnazzo's books tops them all for its combination of quality of research, intensity, and brevity. If I had to pick a single, medium-length 200-page book for the willing student of honest money to read/listen to, this would be the one.
The next installment of my Money Matrix series will attempt to synthesize learnings from Gnazzo's book with Mises' Human Action and current events in the US Treasury market. For me, the implications derived from my studies have been profound.
P.S. What about a 50 pager version, you ask? Free download from Rothbard here (.pdf). Please note I have made no financial gains (nor stand to make any) from this book review.