British Columnist Tries, and Fails, To Refute Ron Paul

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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.

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Gary North [send him mail] is the author of Mises on Money. Visit He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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