How an Economy Grows and Why It Crashes

I N T R O D U C T I O N

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infl ation, America now had to either defl ate prices or devalue 
the dollar. 
Although Irwin argued that defl ation would be the 
most responsible course, since it would restore the lost 
purchasing power of the dollar, he understood that 
economists erroneously view falling prices as a catastrophe 
and that governments have a natural preference for infl ation 
(as will be explored in this book). Given these biases, he 
argued that authorities could at least acknowledge prior 
debasement and offi cially devalue the dollar against gold. In 
such a scenario, he felt that gold would have to be priced at 
$105 per ounce.
He also feared a much more likely, and dangerous, third 
option: that the government would do nothing (which was 
precisely what they chose to do). Then as now, the choice 
was between facing the music or deferring the problem to 
future generations. They deferred, and we are the future 
generation. 
Tower was so impressed with the basic logic of his arguments, 
that he invited Irwin in to address the entire committee. At 
the hearings, all the highly placed monetary experts from the 
Federal Reserve, the Treasury Department, and Congress 
testifi ed that removing gold backing would strengthen the 
dollar, cause the price of gold to fall, and usher in an age of 
prosperity. 
In his testimony, Irwin asserted that the removal of gold 
backing from U.S. currency would cause gold prices to soar. 
But more importantly, he warned that a currency devoid