The Last Call

The fact is that we were sitting in our study the other evening thinking how the Republican Party needs a clear plank on monetary reform, when the doorbell rang and we discovered on our stoop the lanky frame of the editor of the Interest Rate Observer, James Grant. Our neighbor had told us he would be stopping by with something he wanted us to see.It turned out to be a beautifully bound volume of the issues of Barron’s, the national business and financial weekly, from the second half of 1952. There marked with a yellow Post-It note was the page-one editorial of July 14, which ran under the headline “Golden Plank: It’s a Test of Republican Promises.” It was about the call of the Republicans, in the 1952 presidential platform, for a “dollar on a fully convertible gold basis.”One could be forgiven for thinking that, by 1952, we were already in a period of hard money. The country was, after all, a few years into the Bretton Woods Treaty, which bound America to redeem the dollar at a 35th of an ounce of gold. But that was only when it was asked to do so by corresponding governments. The hapless American citizens had been divested of their gold by President Franklin Roosevelt, who spent the Depression setting the gold price out of thin air as he sat in bed in the morning. And there were already signs that Bretton Woods would be just what Henry Hazlitt had warned of — an inflation trap.The plank on which Barron’s fixed was therefore a serious marker, designed to put the Democrats in a corner. It was passed at the Republican convention that nominated General Eisenhower. It was a plank that, Barron’s noted in its first paragraph, the general “is now committed to support.” The measure, Barron’s said, “reflects a deep and legitimate yearning on the part of the American people for a return to hard money.”“Yet if this yearning and this hope are to come to anything,” Barron’s warned, “it is the part of honesty to point out that much more is required than payment of lip service to a golden phrase.” The fact is, Barron’s wrote, “that before gold convertibility, or a return to the gold standard, can be contemplated, certain great conditions must be met. And whether the Republican Party works to fulfill these preconditions will in turn show how seriously it is dedicated to conservative economic principles both at home and abroad. Gold, in short, is the test of larger intentions.”The preconditions Barron’s was citing were set down in the Republican platform as being a balancing of the budget and establishing independence of the Fed, which was being pestered something awful by President Truman’s treasury department. It also dilated on what would have to happen after the institution of a gold standard, namely the establishment of international arrangements. The old gold standard, it noted, “was not a game of solitaire.”It turns out, though, that all these preconditions didn’t sit too well across the hall at the offices of Barron’s sister publication, the Wall Street Journal, which issued its editorial the day after Barron’s cover. “What the Republican platform says about monetary policy is pretty good — but only pretty good,” the Journal declared. It was irked by all the shilly-shallying.The Republican platform wanted the Federal Reserve to be able to function in the money and credit system “without pressure for political purposes from the Treasury or the White House.” The Journal didn’t like the qualifying phrase about political purposes. “If the word ‘political’ in that sentence was not intended to leave a door open to pressure which might plausibly be defended as non-political it has no significance,” the Journal growled. “It should have been deleted.”More substantively, the Journal was worried that the way the platform was nailed together it was asserting that “this country’s return to a gold convertible currency must await the restoration of both a sound domestic economy and a stable world economy.” Quoth the Journal: “When, if ever, will all the world have a stable economy?”Rather than using our influence to bring into existence a stable world economy, the Journal suggested that there is “ample reason to believe that the return of the United States to a gold-convertible currency would exert a more powerful influence on the side of stable world economy than anything else we could do.”If that’s not a schematic of the current debate, we don’t know what it is. It’s a reminder of the timeless nature of the principles that are being fought over today. It validates our own sense that all this to and fro about fiscal and trade imbalances relates to a problem that, while important, is subsidiary. The real issue facing our country is monetary reform and the need to bring to an end the failed experiment in fiat money.* * *The Republican platform of 1952 turned out to be the party’s last call for full convertibility of the dollar into money, which is what this newspaper likes to call gold. Once Eisenhower got to the White House, he rejected, along just the lines the Wall Street Journal feared, a return to convertibility. “[W]e should first begin to work for a healthy trade as the basis for programs affecting money, both their convertibility and their relationship to gold,” he wrote to an adviser, George Whitney. One can almost hear the advisers to Governor Romney today using the echoes of that debate to tune up their arguments for the next nominee. All the more important the effort to prepare for Tampa a platform of monetary reform on which to stand against a president, in Barack Obama’s, on whose watch the dollar has collapsed to below a 1,500th of an ounce of gold.

The Last Call

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