America at 250, the Golden Moment

The approach of the 250th anniversary of America’s independence sent us to the files of the Sun in search of its sentiments on the country’s first 100 years. It turned out to be an optimistic editorial celebrating the “processions, illuminations, music, the sound of cannon, and general applause” with which we were marking the occasion. European republics might be older, the Sun said, but America’s 100 years is “the longest in the history of modern republics.”By our lights the editorial was too blasé in respect of the need for Reconstruction in the South. The paper’s owner, Charles A. Dana, after all, had ridden with U.S. Grant during the war and reported directly to President Lincoln. What struck us, though, was the insight that the Civil War — “like all such wars,” the Sun reckoned — left us with a “load of evils,” top among them being, one might have guessed, a “currency manufactured at will.” Such a fiat currency in post-war America, the Sun warned, created an era of “small men and selfish measures in politics, corruption in the practical administration of the Government, and a low tone of morals in corporate and private business life.” The editors were just getting warmed up. While “deluded with the idea that the promise to pay a dollar was in itself a dollar, the people have squandered their substance in speculation and extravagant living.”Quoth the Sun: “Fostered by the necessities of securing greater revenue, a vast army of tax gatherers has grown up, whose interest is to keep up the Government extravagance, and thus perpetuate themselves in power.” The theme and related complaints animated the Sun for years to the view “this enormous increase and development of the officeholding class is one of the most dangerous of the evils spawned by the war.”Sound familiar? America’s 250th birthday comes at a time when, as at its 100th, the nation is again under a monetary regime of fiat dollars. In 1876, it had been some 15 years since the gold standard was suspended for the Civil War and to pay its bills Uncle Sam began relying on paper scrip. It would take until 1879 for the gold standard to be restored. That meant resuming the convertibility of paper dollars into gold at the legal rate that predated the war.Resumption in 1879 required a political and economic commitment and sparked debate between advocates of sound money and a pro-inflation faction. Yet President Grant acceded to the White House on a vow to restore the gold standard. The pledge was deemed critical to ensuring America’s role as a safe place to invest, partly because a gold standard protected lenders from currency debasement. Sound money was a prerequisite for growth.At Grant’s first inaugural, he crowed that, “to protect the national honor, every dollar of government indebtedness should be paid in gold” and promised that he would revive the dollar’s gold convertibility. That leadership helped to forge the GOP’s reputation as the party of honest money — and of rapid economic expansion with low inflation. By contrast today it has been some 55 years since President Nixon severed the dollar’s last ties to gold. When Nixon breached America’s pledge under Bretton Woods to redeem dollars for gold, a dollar fetched a 35th of an ounce. Today the dollar’s gold value has plunged to less than a 4,200th of an ounce. Restoring the dollar’s gold convertibility at the current market rate, much less at the Bretton Woods level, would prove a political and economic challenge on a par with the monetary reform movement that was in train at the time of America’s centennial. That moment, though, reminds us that restoration — speaking here of honest money — can be accomplished. The final ratification of a return to the gold standard came in the election of 1896, when the Democrat, William Jennings Bryan, declared he would not be crucified on a cross of gold. The convention broke into anti-Jewish chants. The Sun endorsed the Republican, William McKinley, who ran on gold and won it in a walk.

America at 250, the Golden Moment

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