The ‘Almighty Dollar’ Finds a Historian

Brendan Greeley’s new history of the greenback, “The Almighty Dollar,” arrives on shelves at a freighted moment. With a new chairman of the Federal Reserve set to be sworn Friday, inflation shows signs of revival. The dollar’s gold value, at around a 4,500th of an ounce, stands near a historic low. Mr. Greeley’s insight, that “America did not invent the dollar,” could well illuminate a path back to the Framers’ conception of money.“The dollar is both older and more powerful than the United States,” Mr. Greeley asserts. “The dollar came first.” The Constitution reflects the Framers’ decision to focus on an existing unit of currency — the Spanish milled dollar, a silver coin — as its national money. The parchment uses the word dollars twice. Hamilton described this coin, whose dimensions date back to 16th-century Bohemia, as “the ancient dollar.”The wide grasp of what a dollar was is why the Constitution can refer to dollars without citing the definition. Yet the Framers did seek to spare the new nation from fiat money inflation. During the Revolution, governments used paper money to pay bills, leading to hyperinflation. Hence the Constitution forbids states from emitting “Bills of Credit,” akin to paper money, or to “make any Thing but gold and silver Coin a Tender in Payment of Debts.”Congress was given power to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” Using that authority, Congress agreed to Hamilton’s plan to adopt the Spanish dollar, a legally fixed weight of silver, as the national currency. That set the dollar’s value at a 1.29th of an ounce of silver, or about 20th of a gold ounce. Paper dollars were convertible into specie at these rates set by law.For nearly 180 years, a dollar convertible into silver or gold helped to fuel America’s economic rise while holding down inflation. Between 1790 and 1913, economists William Luther and Alexander Salter report, annual inflation rose by but 0.2 percent on average. This system faltered, though, with the creation of the Federal Reserve, and later when FDR and the Democrats abrogated the gold standard in 1933.The last vestige of America’s constitutional dollar — one defined in specie — vanished in the 1970s after Nixon closed the gold window at the Treasury, breaching America’s pledge under the Bretton Woods system. Under that agreement, America had vowed to redeem dollars presented by foreign governments at the rate of a 35th of an ounce. The end of gold convertibility ushered in years of stagflation and a plunge in the dollar’s value of 99 percent — so far.The history of America’s constitutional currency shows that a dollar convertible into specie at a rate set by law has proven the best way, over the long run, to hold prices steady. Even when prices did rise, as they did, say, during wars, they eventually retreated back to prewar levels. Under a fiat money regime, prices only ratchet ever higher. The price surge of some 20 percent during the Biden inflation wave is the root of today’s dissatisfaction over affordability.“The gold was gone. The dollar remained,” is how Mr. Greeley sums up the greenback’s fate since 1971. He argues that the dollar has in effect transcended its origins as a form of honest money while retaining its influence. Yet the currency’s debasement in terms of gold and silver, and today’s difficulty in defeating inflation, suggest the limits of this outlook. It suggests that America’s future depends on a return to the Founders’ idea of a constitutional dollar.

The ‘Almighty Dollar’ Finds a Historian

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