Wars Against Sound Money

 


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The book that is the subject of this review is Gold Wars, published in 2001, by Swiss banker Ferdinand Lips. Lips’ stated purpose is to inform the public of a critical monetary, currency, and gold war. His book spends much of its time examining the role of gold in our current worldwide fiat monetary system.

Lips wastes very little time in explaining how money works and getting into in-depth theoretical discussions of monetary policy and the gold standard. He starts with a brief overview of the role of gold as money throughout history, from the Ancient Egyptians up to World War I, the Genoa Convention, and the Bretton Woods agreements of the 1940's. Lips sees the beginnings of the current financial crisis in these events and agreements, as they allowed for governments and central banks to print paper money with no backing.

The book spends much of its time moving throughout the history of central banks’ manipulations of gold as money. Lips states that governments strive to keep the price of gold down because the precious metal is one of the few goods that they can not control. National currency that is backed by gold would not allow for governments or bankers to destabilize the price of gold arbitrarily, or cause inflation by printing too much money.

A vast number of other issues relating to the use of gold are also raised. Some of these issues include the manipulation of prices caused by hedging, the role of the International Monetary Fund in controlling gold prices, and the financial and human devastation caused by the manipulation of the price of gold in poor gold-producing countries, mostly located in Africa. Although there is little room in this short (280 page) book to examine each of these items in detail, Lips does a remarkable job of bringing these often overlooked issues to light.

It is the last chapter, though, that seems to touch the author most intimately. He examines the betrayal of Switzerland in the 1990's that caused that country, whose currency was one of the last to be backed totally by gold, to abandon its sound money and join the rest of the world in the funny money fiat game. Lips sees the country's joining of the IMF as the real end of Swiss monetary sovereignty, although the nation did not officially abandon its gold until 1997. This event caused the Swiss currency to float against all the other currencies of the world, and the country has sold much of its gold since this time.

The overriding theme of the book is the gold wars that have been waged between central banks and the precious metal. Although it is inevitable that the current system of debt-based paper money will eventually fail, the designers of this system have chosen to manipulate the price of gold ever more, in order to keep up the appearance of gold as a poor backing for sound money. However, through quote after quote from respected bankers and researchers, Lips presents the case that this manipulation will only make the crash of the current system all the more serious when it finally arrives. Lips uses such sources to back up his arguments as Alan Greenspan, former chairman of the US Federal Reserve, and Congressman Ron Paul, former member of the Congressional Gold Commission who recommended that gold once again be used in monetary policy.

This book is an amazing introduction to the ideas of gold as money and its manipulation by central banks throughout time and across the world. It is also a well argued treatise on the futility of continuing to drive down the price of gold and the cruelness of the current credit-based system that is so easy for governments to manipulate. The book is highly recommended to anyone who has ever wondered why prices always seem to rise even when their own financial situations have remained stagnant or are declining.

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