JD Vance’s Dollar — and the Fed’s

Just before sitting down to tap out this column, I looked up an editorial called “Fix What Broke.” It appeared in the Wall Street Journal in July of 1984. That is two generations after the soon-to-be victorious powers in World War II sat down at Bretton Woods, New Hampshire, to establish a post-war monetary system. They gave us a gold exchange standard centered on a dollar redeemable by foreign governments at a 35th of an ounce of gold.Bretton Woods lasted only until 1971, a span of strong growth with an average annual rate of inflation of 3.2 percent and an average unemployment rate of 4.6 percent. The failure of our Congresses to curb government spending, on guns and butter, led to the collapse of the postwar monetary system. That’s when the Journal issued its editorial “Fix What Broke.” Its author, Robert Bartley, had recently acceded to the editorship of America’s largest newspaper.What reminds me of “Fix What Broke” is the hubbub on the internet the other day over remarks Vice President Vance made back when he was a senator. He questioned whether it was in America’s best interest for the dollar to be the world’s reserve currency. That reserve status grew from Bretton Woods, the demise of which led to the abandonment of the commitment to redeem foreign governments’ dollar holdings in gold. It also begot higher spending.Hence Mr. Vance, two generations after Bartley, is declaring, “I am not sure that I think the reserve currency is actually good for the United States of America.” Mr. Vance compared the fiat money system that emerged from our default under Bretton Woods to what economists call the “resource curse” — as in, say, oil or coal deposits. Such resources make it easy for a government to over-spend. No wonder Mr. Vance’s remarks are causing a buzz.Particularly given that President Trump has made it a point to declare that he supports the dollar’s role as the world’s reserve currency. He has even, at times, celebrated a weak dollar, figuring it makes our goods cheaper for buyers from overseas. It also makes it possible for borrowers to pay back their loans with dollars worth less in gold than they were worth when they were borrowed. At this writing the dollar’s value in gold is less than a 4,500th of an ounce.A number of those who follow this issue had hoped Mr. Trump would launch a reform of the fiat money system. Yet the president, in both his first and second terms, has shrunk from the challenge. Not that Mr. Trump hasn’t summoned an astounding economy, well marked by our Larry Kudlow. Yet the system has remained untouched. Secretary Bessent has talked of reform, but it doesn’t extend to the issues that came into focus at the end of World War II.Which brings us back to “Fix What Broke.” One of the first things that President Reagan and Congress did when the Gipper acceded to the presidency was to name members to the United States Gold Commission. Its aim was to weigh the question of restoring a role for gold in the monetary system. Yet defenders of fiat money outnumbered sound money advocates on the commission, and its final report was a rejection of a return to a gold standard.Aside from brilliant dissents by two commissioners, Lewis Lehrman and Congressman Ron Paul, the commission was a failure. It could have led to Congress reassessing fiat money. By 1984, after all, it was clear that something had to be done. At the time, the value of the dollar had plunged to a 335th of an ounce of gold. Today it’s not worth a tenth of that. To Mr. Vance — and to the new chairman of the Fed and colleagues — we commend Bob Bartley’s editorial.Bartley once declared, “It takes 75 editorials to pass a law.” Sadly, he died while the chance was young. His editorial “Fix What Broke” spoke of America’s responsibility for a stable price of gold. “Bretton Woods collapsed, because the U.S. was derelict in this responsibility. The Federal Reserve never took seriously the necessity to arrange monetary policy to keep gold at $35.” It concluded: “We need a new Bretton Woods, “to repair the damage for another generation.”

JD Vance’s Dollar — and the Fed’s

JD Vance’s Dollar — and the Fed’s

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