James Turk Brings Sound Money Principles To A New Generation

James Turk has long been a friend of gold. The founder of GoldMoney in 2001, and also the author of the Free Gold Money Report over many years, summarizes some of the knowledge collected over his career in a new book, Money and Liberty: In the Pursuit of Happiness and the Theory of Natural Money (2021). I have been on the lookout for a “shelf of books” from contemporary authors, that can serve as an intellectual foundation for a new era of Sound Money (money based on gold) in the US and throughout the world. Turk’s new book contains plenty of insight and timeless wisdom, updated to our present times and current concerns, and serves as a one-stop source of much “gold lore” that is necessary for anyone interested in these topics. I imagine it as a sort of textbook especially for younger people, who instead might have to look here and there for scattered bits and pieces, and then have to sift those for error and fallacy. I have done this, so I know that very few will undertake such a task; and of that already small group, very few will successfully toss out the accumulated garbage of decades to find the pearls of wisdom within. In other words, it helps to have a guide. Turk dedicated his book to his two sons, suggesting to me that he had something like this in mind when he wrote it.

My own books have tended toward a somewhat technocratic approach — the economic equivalent of “rocket science” — so I am glad to see someone express some of the broader principles of statesmanship whose purposes these technocratic methods serve. Chapter Two describes the core role that money plays in our “pursuit of happiness,” every person’s ambition to better their personal situation. This requires mutually-beneficial cooperation with others; and the primary way we do this is through monetary transactions. When money is neutral and reliable, free of government control and manipulation, this individual pursuit of happiness becomes collective prosperity and freedom. Gold is “natural money” because it best serves this human need for a neutral and reliable medium of exchange. No attempt by central banks to improve the situation via monetary distortion and manipulation can produce a better outcome, although the effects might provide some advantage here and there, for a limited time. But more broadly, a system of macroeconomic manipulation by a handful of money bureaucrats, who don’t seem to have any consistent method or track record of success, undermines all principles of liberty, and delivers us all into an all-enveloping system of monetary tyranny. Like most other socialistic systems of government control, in all of history, it has never ended well. Turk includes many real-world examples of how these principles play out in our recent experience.

Nevertheless, I disagree with Turk on a number of points. The book is flawed, I think, with an excessive focus on “fractional reserve banking,” the old hobby-horse of Murray Rothbard. Rothbard argued, rather bizarrely, that basically the whole modern edifice of banking, arising in Italy from about the twelfth century onward, must be overthrown to once again have a currency based on gold. Rothbard began this crusade during the 1960s, a time when the US dollar was already based on gold via the Bretton Woods system, and when banking and the economy as a whole was going along just fine in one of the most prosperous decades in American history. The Bretton Woods system did have a number of serious flaws, which led to its disintegration only a few years later, in 1971. But, this had nothing to do with “fractional reserve banking,” which had coincided with gold-based money for the previous 500 years. As part of Rothbard’s reveries, he also imagined that returning to a “100% gold dollar” would involve about a 10:1 devaluation of the dollar, from about $35/oz. at the time to about $350/oz. — a rather inscrutable notion for a supposed “sound money” advocate.

This was very dumb. However, despite adopting some of the same terminology, it seems that Turk does not really have any of Rothbard’s policy prescriptions in mind, but instead reiterates his view that a high gold reserve ratio — Turk specifically mentions 40%, which apparently Isaac Newton recommended to the Bank of England in the early 18th century — is a desirable thing in a monetary system. Turk himself built a “100% reserve” system, comparable to the Bank of Amsterdam in the 17th century, in the form of GoldMoney. The system was originally designed to facilitate payments in “electronic gold,” directly and contractually linked to real bullion in a vault, effectively serving as a sort of digital currency. Unfortunately, GoldMoney has not really achieved its promise and potential, in part because governments imposed a lot of regulatory barriers to keep GoldMoney from becoming popular enough to undermine their fiat currency monopolies. Today, “crypto stablecoins,” including those based on gold, have been achieving similar goals, but we may eventually conclude that a centralized system like GoldMoney — or the ACH system that already clears millions of USD bank transactions daily at minimal cost — is a lot more practical. GoldMoney today continues as more of an investment vehicle than a payments or transfer vehicle — a savings account, instead of a checking account — but it still has the potential to rise to its original purpose and destiny.

Turk also, I would say, uses the “fractional reserve banking” label to refer to a wide variety of dubious interactions between today’s banking system, central banks, and probably bond markets, within the context of today’s floating fiat currencies. The former governor of the Bank of England, Mervyn King, fittingly labeled this the “alchemy” of modern monetary policy, also suggesting George Soros’ book The Alchemy of Finance. King — for a time employed as Britain’s Chief Alchemist — thought this “alchemy” should end. Turk’s criticism of this regime is shared even by those working at its heart. “Sound Money,” or money based on gold, removes money from the hands of the money manipulators. It is like sunlight on vampires.

James Turk’s background is in banking and asset markets, not academic economics where careers are made on the promotion of institutional dogma often divorced from reality. This practical stance informs his book throughout, with much material that gets to the heart of the matter, and has stood the test of experience. I do not want to focus too much on certain differences of opinion, which I consider flaws, but rather emphasize that the book delivers plenty of core knowledge, from a practitioner involved in these topics for decades. If we had another dozen people who knew as much about money and liberty as James Turk, we would be well on our way to building a much better monetary foundation for our continuing prosperity.