Sunday, August 10, 2014

Announcing availability of a Monograph few will read: The Gold Clause

It’s understandable if recipients of this announcement are surprised that I predict few people will read my new Monograph The Gold Clause.

That’s because the Monograph’s subject—a device originated during the Civil War to protect the value of private debt, and then unconstitutionally illegalized by President Roosevelt’s “New Deal”—is somewhat arcane and specialized. There’s a limited audience even among those with an interest in economics and financial affairs.  Even those interested in gold. Indeed, while uncorrupted economics is mostly straightforward (e.g., increase in the free-market-bashing minimum wage causes loss of jobs), because of government meddling the subject of gold—let alone the gold clause— is complex and often numbing.

Because substantial editing of The Gold Clause’s first edition has brought the new version down to about 30 pages, I consider the latter to be a Monograph, not book, length.

Accordingly, I’ve decided “publish” the Monograph edition of The Gold Clause in pdf form, and park it on my former website where it will be accessible via a simple link (see below). (This is what I’ve done with my North Korea and Government’s Money Monopoly Monographs.)

Here’s the Table of Contents and Introduction:


A little used anti-inflation antidote  
The gold clause’s historical roots
The Legal Tender Cases
A bad deal for the gold clause, and the creditors who relied on it
The Gold Clause Cases
Re-legalization of private gold ownership
Limited retroactivity of the gold clause


In 1980 I wrote and edited The Gold Clause: What it is and how to use it profitably. My book’s forward was written in 1979 by Henry Hazlitt, noted free market journalist who for decades wrote about business and economics for such publications as The Wall Street Journal, The Nation, The American Mercury, Newsweek, and The New York Times. Among his books are the classic Economics in One Lesson and What You Should Know About Inflation. Mr. Hazlitt wrote:

     The factual materials, and his own brilliant legal analyses, which Henry Holzer has brought together here, combine to make this book invaluable—to the corporation attorney, to the monetary economist, and to the interested layman.
     Practically every monetary economist now agrees that, appalling as the evils of a runaway inflation may be, they cannot be corrected by deflation. The late Ludwig von Mises used to compare the belief that the damages of inflation could be undone by a corresponding deflation with the belief of a motorist who has just run over a man that to back up over his victim would correct his mistake.
     The damage done by an inflation is irreversible. Even trying to bring an inflation to a halt may do additional damage—though it will be less than the evils of allowing the inflation to continue.
     So it is with our government’s action in 1933 in repudiating not only its own solemn printed pledges to make its currency convertible into gold, but in making it impossible for private citizens to keep their own pledges to redeem their obligations in gold.
     Repudiation of the 1933 gold clauses cheated creditors to benefit their debtors. This amounted to a forced transfer of private property. It deeply shook confidence throughout the business world. It shook it not only in past but in future pledges. But if the pre-1933 pledges were today suddenly declared by the Congress and the courts to be valid, all degrees of new forced transfers of private property would take place. Present holders of pre-1933 bonds, who may have acquired them at the merest fraction of their new value, would get unexpected windfalls. Old corporations with such bonds outstanding would be forced into bankruptcy. And if Congress or the courts sought a compromise solution of the old gold-clause pledge that would secure “justice” in every instance, it would find the task impossible.
     As an economist, I must confine myself here to calling attention to the admirable way in which Professor Holzer has emphasized the enormous economic damage done by the repudiation of the gold clause, and leave it to others to judge how well he has performed his analysis of the legal consequences of the gold-clause repudiation, and how satisfactory his recommendations are regarding what the future status ought to be.
     The aim of the law should surely be to uphold the inviolability of legal contracts in order to maintain and justify faith in those contracts. When the law in any case does the exact opposite—when it not only permits, but practically orders the breaking of pledges and the repudiation of contracts—the evil consequences are beyond measurement.

The Gold Clause can be accessed at no charge HERE