Peter l. Bernstein's history of the metal's expansive grip falls short in many areas, but makes a case for old-economy basics

Brands are hard to forge and easy to tarnish. Yet in the search for bigger markets or greater profits, it is all too tempting to debase a winning formula.

What is true for companies also holds for individuals. Take Peter L. Bernstein, author of "The Power of Gold: The History of An Obsession." Bernstein, a money manager and consultant as well as an author, is best known for his widely-acclaimed "Against the Gods: The Remarkable Story of Risk. While "The Power of Gold" is likely to become another popular success, Bernstein's latest offering falls short of his previous work.

"The Power of Gold," which traces the metal's history, has its strong points. The writing is lively, and Bernstein is able to extract crucial lessons. He takes a monetarist's viewpoint, showing how the physical amount of gold and silver in circulation affected prices, economic growth, and behavior. He also coins interesting observations, the most important originating with Disraeli, that the success of the gold standard resulted from, rather than created, stability and prosperity.

One problem is the text's uncertain focus. Bernstein's earlier book, "Against the Gods," traced the development of the mathematics and the market mechanisms involved in the measurement and management of risk. The succession of discoveries and innovations undergirds the narrative.

By contrast, in "The Power of Gold," Bernstein has only a couple of central themes, namely, the tension between gold's role as ornament versus its use as money, and the impact of its use as a currency, and they do not provide him with a sufficiently strong framework. He too often is tempted to include anecdotes, such as the myths of Midas and Jason and the Argonauts, and tales of stupendous ransoms paid in gold, for their entertainment value rather than their fit. Mind you, digressions provide welcome leavening to otherwise leaden topics. But here one is left with too many questions about the choices made.

A more serious problem, however, is that Bernstein often gets his facts wrong. Minor errors will inevitably appear in a lengthy work, but their frequency here is disconcerting. Bernstein asserts that Christians have "several thousand saints to pray to" (most Protestants would take exception); that "Lydia mined a metal called electrum, often referred to as 'white gold,'" (electrum and white gold are alloys and do not occur in nature); and claims that hoarding cattle in Africa has produced serious ecological degradation (wars, emergence of national boarders that restricted migration, and overdigging of wells are bigger culprits).

The inaccuracies result from reliance on too few sources for portions of the story, leading Bernstein to unwittingly repeat their errors and biases. A low point occurs when he dismisses the Byzantine Empire as a "decadent, corrupt, conspiratorial, cruel bunch of people." when his only historical (as opposed to gold-related) source is the Encyclopedia Britannica Online. The prejudice against Byzantium originated with Edward Gibbon's "Decline and Fall of the Roman Empire;" historians like John Julian Norwich have shown it to be minsinformed.

Bernstein also presents interpretations that are at best debatable. He seems to feel the need to burnish the importance of his subject, and too often attributes major developments solely to gold's effect. He argues that "if the surge in the purchasing power of gold had occurred during a less innovative era, there would have been no one like Henry the Navigator, Columbus, or Magellan." He ignores the desire of rulers that had just exiled the Arabs to break free of their hold on the Mediterranean, and the lucrative spice trade. He attributes the Great Depression to attempts to maintain the gold standard. In fact, academics still debate what caused the Depression. While recent papers have paid more attention to the gold standard, the stock market crash, which created uncertainty in incomes that led to a sharp drop in consumer spending, is still a leading suspect.

And Bernstein completely misses the point when he derides Charles de Gaulle for his failed effort to revive the gold standard. "Had the citizens of France and the rest of Europe been the same kind of free-spenders as the Americans, the sequence of events would have been entirely different." America can run massive current account deficits because the dollar is the reserve currency and it can finance deficits without incurring exchange rate risk. De Gaulle was promoting gold as an alternative to the dollar precisely to end this unfair advantage.

Despite its flaws, "The Power of Gold" presents a compelling case for monetary orthodoxy, which stands in sharp contrast to a New Economy cut free of its monetary moorings. Macroeconomists and the Federal Reserve have abandoned the use of money supply as an tool, since the myriad forms of near-money arguably make its measurement a futile task. It seems puzzling that Greenspan has researched the behavior of stock prices extensively, even though the equity markets fall outside the Fed's purview, but had not made a similarly intensive study of money supply, which has proven to be a linchpin of prosperity.

Establishing a successful brand forestalls criticism, which will doubtless enable "The Power of Gold" to win more acclaim than it would otherwise warrant. Only history will tell if the cult of Greenspan has created a similar protective shield.