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British Columnist vs. Ron Paul’s View of Central Banking

Written by Gary North on March 8, 2012

A columnist for the London Telegraph admitted that he had a deadline to meet, but he had nothing much to say. Then he proved it.

I doubt his audience had any idea what he was talking about when Ron Paul, the US presidential hopeful, declared that “we are all Austrians now”, but you have to be a true believer in that particular school of economics to think that doing nothing at all might actually have some merit. Would the world be any worse off without central banks? Well, they don’t seem to have done too well in recent years. They seem to be like the grand old Duke of York, marching things up to the top of the hill only to march them down again. Why not just stay in the same place?

It’s an amusing thought, but the history of money before the advent of modern central banking is not reassuring.

This indicates that financial reporting in Great Britain is as ill-informed as it is in the United States.

Consider the monetary system that existed for a century before the Federal Reserve System. The international gold standard linked Western Europe and the Western hemisphere.

Commodity prices In England from the end of the Napoleonic wars in 1815 until the outbreak of World War I in 1914 declined by one-third to one half. Economic historians have known this for 95 years. See the book, Economic Conditions, 1815 & 1914 by H. H. Hodges. It appeared in 1917.

In the way of general price movements, it must suffice to say that according to the calculations of  Jevons and Sauerbeck, the average of wholesale prices of general commodities in England for the  years 1912-14 was between one-half and two-thirds  of the average for 1810-20.

There were ups and downs, booms and busts, because there was fractional reserve banking, as Austrian business cycle theory contends. But wholesale prices did not rise for a century.

The Federal Reserve System went into operation in 1914. The dollar has declined in purchasing power by over 95%.

No central bank has preserved the purchasing power of its national currency since 1914. Every nation has experienced price inflation. Every nation has also experienced booms and busts.

The promise of central banking was simple: price stability and a reduction in the severity and frequency of what we now call recessions. We got more recessions, and the Great Depression, which lasted a decade.

Ron Paul understands Austrian business cycle theory. He also understands more of price history than the columnist does.

The level of economic understanding within the financial media is abysmal.

Continue Reading on blogs.telegraph.co.uk

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4 thoughts on “British Columnist vs. Ron Paul’s View of Central Banking

  1. wnettles says:

    The more control that the government tries to exercise over the value of the unit of currency (dollar) , the more exagerated the error (devaluation) becomes. Less control means less error. More control yields more error. The more that governments try to control their currencies, the less stable that they become. A simple examination of our own money system over the last 200 years will reveal this.

  2. It doesn't surprise me that Paul knows what he's talking about.
    It's just kind of disheartening that people will not listen to what he's saying.

  3. Grumpy Old Man says:

    Dr. Paul is fighting an establishment that is terrified of him and will do anything, I repeat anything to discredit him. So who do you like in my case I like the one that the establishment fears.

  4. Wrangler Rob says:

    This is what the Government Indoctrination Centers (aka Public Schools) have failed to teach. From Rome to the present every kingdom or empire has devalued it's currency to get more money to buy influence and prestige. The resulting inflation has ultimately bankrupted each one.

    While the article is excellent, I believe that the statement that there has been 95% devaluation since the early 20th Century is a woeful understatement. There has been 8 to 12% inflation in every decade since 1960. This means there has been an average of 100% inflation (devaluation) each decade since then. Between 1960 and 2010, using 1960 as the base year, the US has seen its currency inflated by 500%!!!!

    All to buy influence and prestige for Congressmen. Remember, ALL spending and budget approvals originate in Congress. Thus, our representatives have shown they have governed poorly.

    It is past time to cut the budget; we do not have a tax & income problem, we have a spending problem that now drives the Federal Reserve Bank to print worthless dollars to feed the Government's appetite.