The Birth of a New Currency

by CONGRESSMAN RON PAUL of TEXAS

THE FOUNDATION FOR
RATIONAL ECONOMICS AND EDUCATION, INC.
LAKE JACKSON, TEXAS

Copyright © 1981 by the Foundation for Rational Economics and Education, Inc.,
Post Office Box 1776, Lake Jackson, Texas 77566.

Permission to quote from, or to reproduce liberal portions of, this publication is granted, provided due acknowledgement is made.

Printed in the United States of America.

Photographs courtesy of the Chase Manhattan Archives.

Second printing.

Dedication

To Carol, whose love and support
are more precious than gold.

Foreword

In this short pamphlet, Congressman Ron Paul has written one of the most enlightening explanations of inflation that I have ever read. It is both a history and an analysis. That history goes back further than our Revolutionary War, but as a continuous narrative it begins, as it should, in 1913 and 1914.

Preface

Ron Paul is a most unusual politician—in many ways. In the first place, he really knows what he’s talking about. He is not only for the gold standard. He knows why he is for it, and he is familiar with the most advanced and complex economic insights on the true nature of inflation, on how inflation works, and how inflationary credit expansion brings about booms and busts. And yet Ron has the remarkable ability to take these complex and vital insights and to present them in clear, lucid, hard-hitting terms to the non-economist reader.

Acknowledgements

I am grateful to the supporters of the Foundation for Rational Economics and Education, Inc., whose generosity made the publication of this booklet possible. Thanks are also due to my administrative assistant, Lew Rockwell, for his help in preparing the essay for publication.

Ron Paul

Impending Social Strife?

The greatest threat facing middle and working class Americans is our depreciating paper currency.

At least when the kings of old debased their coinage, by adding copper to the precious metal, there was still some objective value to the resulting money. But as economist David Ricardo observed almost two centuries ago, when money costs nothing, it will become worth nothing.

The People Are Demanding an End to Inflation

The recent chaos in the money markets is telling us that the world is rejecting the American dollar as a reserve currency, and agreeing with the young man in Martin Gilbert’s story. Tragically, there is probably little future for the dollar, or dollar- denominated assets.

Depreciation Is Nothing New

A gold bezant, the major trading coin of Byzantium.

“Not Worth a Continental”

U.S. paper Continental currency,

In more recent times, to finance our Revolutionary War, the Continental Congress issued paper money in great quantities. Over a period of about four and a half years, the Continental currency fell from a value of one paper dollar per one gold dollar, to about 1,000 to one.