With Rand Paul’s victory in the Kentucky Republican primary, an old conspiracy theory has suddenly gained a prime-time audience.
Campaigning in Montana for his father, Ron Paul, in 2008, Rand Paul explicated his belief in an elite plot to replace the U.S. dollar with a new currency: “the Amero.” (You can listen to Rand Paul discuss the plot here.)
Creation of the Amero is alleged to be just one step toward a sinister “North American Union.” Another step is a putative “NAFTA super-highway” -- 10 lanes of roaring road stretching through the middle of the United States to connect Canada and Mexico.
In his struggle against the Amero, Rand Paul complains, “the thing you just have to be aware of is that, if you talk about it like it's a conspiracy, they'll paint you as a nut.” Paul adds: “It's not a conspiracy; they're out in the open about it.”
My curiosity piqued, I started Googling. And what do you know? There are people out in the open talking about the Amero. One of them is an old, old friend of mine, Prof. Herbert Grubel of British Columbia’s Simon Fraser University. In fact, it was Prof. Grubel who coined the term in a book published in 1999. Alas, as Grubel has sadly confessed in many interviews, nobody in any North American government has ever shown any interest in his project.
And no wonder! A single North American currency offers no benefit to the United States while it would be positively dangerous to Canada and Mexico. In fact, Canada’s brief experience with a fixed link to the U.S. dollar was so disastrous that Canada dropped out of Bretton Woods in 1950, 21 years before other major countries abandoned the international monetary regime.
Ditto for Mexico. A fixed rate of exchange between the peso and the dollar helped precipitate the Mexican debt crisis of 1994 and the ensuing prolonged Mexican recession.
I realize there’s something absurd in trying to debunk conspiracy theories. People don’t reason their way into them, and they are not reasoned out of them. Consider the “NAFTA Superhighway.” Its main proponent, Jerome Corsi, helpfully publishes a map revealing the route of the highway, which crosses the U.S.-Canadian border at Duluth, Minn.
And what’s on the other side of that border? A pristine provincial park, almost 1,000 miles from the nearest Canadian industrial center. A worse terminus for a North American highway can hardly be imagined. If you actually were to build a NAFTA super-highway, you’d want it to cross at Detroit—to gain easy access to the industrial zone of southern Ontario. Oh wait: They already built one back in 1929. People seem to like it too. The Ambassador Bridge is the busiest border crossing in North America, supporting 150,000 jobs in Canada and the United States. The bridge is so heavily traversed that the two governments are now adding a second span and new access routes. Is that a bad thing?
But here’s what is most crazy about Rand Paul’s particular conspiracy theory. There is indeed one prominent American politician who does advocate abolishing the dollar as we know it—ending American financial sovereignty—and entrusting all monetary policy to foreign decision-makers. That politician, of course, is Rand’s father, Ron Paul.
Ron Paul’s big idea is to end the Federal Reserve’s discretionary authority over the U.S. money supply, just as Greece, by joining the European Union, ended the discretionary authority of the central bank of Greece. Paul calls his idea a gold standard, but its economic effect would be exactly the same as that of the euro upon Greece: The local central bank would lose the power to create money, which would be created elsewhere—by the European Central Bank in the case of Greece, by the gold miners of Russia, South Africa, Australia, and Canada in the case of Ron Paul’s United States.
The benefit of such a system is that it prevents the local monetary authorities from deliberately fomenting inflation. The detriment is that it prevents the local monetary authorities from mitigating recessions and depressions. That’s why the U.S. abandoned gold in 1933–34, and why Greece is desperately looking for aid from its European partners today. Most people in most places have decided that the detriments of externally fixed currencies exceed the benefits.
My friend Herb Grubel took the opposite point of view. Grubel at least understands what he is arguing for and what he is arguing against. For the Pauls, father and son, to attack the mythical Amero as an attack on U.S. sovereignty, however, and to champion gold as a buttress of sovereignty, is a basic failure of economic comprehension. Indeed, their failure illustrates the old jibe: “The problem is not that you lack principles – it’s that you don’t understand the principles you have.”