THE GREAT BETRAYAL

A debut book offers a concise history and critique of American monetary policy.

Current debates about U.S. fiscal policy are typically ahistorical, assuming that a return to earlier interpretations of banking and currency regulation is implausible. Calabro, however, argues for precisely this, a rehabilitation of monetary policy based on a resumption of the gold standard, and the concomitant rejection of fiat money. To that end, the author furnishes a short history of American banking, from its largely decentralized genesis to the Federal Reserve’s response to the 2008 recession. According to the author, the critical mistake was the final abandonment of the gold standard, which not only removed a key limitation on the ad hoc creation of currency, but also permanently obscured the true value of goods and services, enshrining the threat of inflation. Furthermore, there was an unmooring of the value of savings: “In the absence of the gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value.” Calabro contends that the establishment of the Federal Reserve—an act President Woodrow Wilson deeply regretted—had pernicious consequences not only for the health of the American economy, but democracy as well. The author discusses a basket of related issues—the absence of a true recovery from the last recession and the inadequacy of quantitative easing, the creation of hedge funds, derivatives, and the International Monetary Fund. He makes a spirited case for a more positive interpretation of President Ronald Reagan’s economic legacy, and lucidly contrasts Keynesian monetarism with the more market-oriented Austrian School of economics. Calabro is at his best broadly discussing grand theoretical and historical shifts rather than the minutiae of contemporary policy—it’s hard to be exceedingly rigorous or deep in under 100 pages. Furthermore, the author too digressively detours from the main thread of analysis in the final chapter, which includes a discussion of St. Thomas Aquinas’ commentary on immigration. For a quick primer on the development of American monetary policy, though, one could hardly do better—this study is accessible, sober, and comprehensive.

A useful, if partial, sketch of an increasingly serious and topical fiscal issue.