Another provocative tome from George Gilder

Forbes publisher Rich Karlgaard offers praise for the latest book from George Gilder, The Scandal of Money.

Gilder’s book ponders the brave new world of Bitcoins and other encrypted digital currencies.

Gilder’s crucial point is that the U.S. made a grave mistake when it went off the gold standard in 1971. This destroyed several key and valuable features of money–its stability, information value and relationship to time. The result has been predictable, if not foreseen in 1971: Financial engineering has boomed; long-term investment has waned. Annual U.S. economic growth from 1971 to the present is below that from 1945 to 1970.

The area of financial services is now four times larger relative to the total economy than it was in 1971. Hot money manipulation is a rational response to unstable money and low interest rates. The ill effects can be seen even in Gilder’s beloved Silicon Valley, where the majority of venture capital investment now goes toward Web apps of fleeting value.

Bitcoins and their like will fill the need for stable money, predicts Gilder. But hold on to your hats, because it’s a guarantee that governments around the world will battle Bitcoins to the last breath. Without the power to manipulate currency, governments will shrink. Bad for them, good for us.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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