It’s nice to see the Times take an interest in the collapse in the value of America’s currency, reported under the headline “How Low Will the Dollar Go?” The greenback “traded near a three-year low on Monday,” the Times frets. In terms of what? The Times doesn’t specify, but the nadir is “against a basket of its trading partners,” per the Financial Times. Yet nary a syllable in respect of the monetary metal that serves as the basis of all value.

We speak of gold. So while the Times has its awakening to the dollar crisis, it is missing the story. It’s watching the dollar’s fall against the fiat currencies issued by our trading partners, but offers no mention of the fact that the dollar today fetches a bit more than a 3,350th an ounce of gold. That’s off some 22 percent from its value on the day President Trump was elected — and nearly 99 percent from its value in 1971, when America severed the dollar’s last link to gold.

At that point, when President Nixon abrogated America’s commitments to redeem in gold dollars presented to it by foreign governments, the greenback was legally convertible at the rate of a 35th of an ounce. Nixon’s default opened up the era of fiat money. Under that regime, the world’s irredeemable electronic paper ticket currencies — like the yen, the yuan, the euro, and other scrip — gyrate in value against each other, not in terms of gold.

That’s the context in which the Times cautions that “the greenback could fall further.” Morgan Stanley analysts “see it tumbling about another 9 percent over the next 12 months,” the Times adds, while “JPMorgan Chase and Goldman Sachs have also made bearish calls in the past week.” Again, though, these movements are in terms of the nebulous sphere of other fiat currencies, with no reference to the gold by which money was traditionally defined in law.

Embroidering on the same theme of dollar decline, the FT reports that the greenback “slid towards a three-year low” at the same time that America’s “government bonds came under pressure on Monday,” the results, in part, of “growing warnings over the sustainability of the country’s debt pile.” That’s a reminder that America’s crisis of fiat money is intertwined with the crisis of federal debt, which has surged past $36 trillion.

The shift to fiat money has enabled this nigh-unprecedented runup in government debt, which is far from unique to America. The International Monetary Fund has warned that global government borrowing is reaching unsustainable levels. It could exceed the level of world economic output by the end of the decade. Under the gold standard, such an accumulation of debt would have been barred by the priority of maintaining convertibility of currencies.

The obligation to exchange paper money for gold at a rate fixed by law once ensured that countries kept their budgets, and their trade, in balance. Under the fiat money system, no such discipline prevails. For now “King Dollar” rules the roost of debased fiat currencies, per the Times, noting that investors, even if “they are increasingly hedging their bets against U.S. assets,” are not necessarily “ready to ditch the world’s reserve currency.” 

Would it be so bad if they did, though? These columns have marked how the dollar’s global reserve status is a kind of “poisoned chalice,” as monetary sage James Grant puts it, that facilitates budget and trade deficits. Now that the Times has started to take an interest in the story of the collapse of America’s fiat money, we look forward to the next step, meaning the realization that reviving the credibility of the dollar would mean restoring its legal definition in gold.