What Really Went Wrong with the Nixon Shock? (Updated)

August 15th, 2011 at 6:25 pm David Frum | 61 Comments |

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On the Wall Street Journal op-ed page, Lewis Lehrman delivers a lament over the 40th anniversary of Richard Nixon’s “new economic policy.”

In the middle of August 1971, President Nixon announced an ambitious package of reforms intended to quell the country’s gathering inflation problem.

Nixon imposed a temporary wage-price freeze, to be followed by a longer period of wage and price controls.

He imposed a 10% tariff on imported goods, mainly aimed at Japanese manufactures.

And he withdrew from the Bretton Woods financial system, severing the dollar’s last connection to gold and allowing the dollar’s value to float (ie, sink) against the yen and other foreign currencies.

The Nixon program did not succeed. From almost every economic point of view, the subsequent 10 years would be the second worst decade of the 20th century, after the 1930s. (Although in retrospect, the 1970s were a walk in the park compared to the economic disasters of the period since 2007.)

I give Nixon few marks for his actions in 1971. Richard Nixon was a dreadful economic manager, a point ferociously documented in this excellent study by Allen Matusow.

But Lewis Lehrman’s critique – a critique often echoed in the Journal’s unsigned editorials as the paper’s own point of view – raises some very complicated problems.

Here’s the story they want to tell:

Once upon a time, money was not created by governments and central banks. Money was honest stuff, created by God and dug out of the ground by hard-working miners. That money was gold, and so long as the U.S. dollar rested on gold, the U.S. knew stability and prosperity. Then a great sin occurred. In August 1971, the U.S. departed from gold. Since then, money is whatever the government says it is. As a predictable result, money has lost its value and we are all poorer for it. The answer is to repent and revert to money stamped from metal.

The story is worse than fantasy. To the extent that the story contains truth, the elements of truth are exactly the opposite of those the Journal and Lehrman would have you believe.

The United States adhered to the classic gold standard for a surprisingly short time: from 1873 until 1934 with a brief time-out during World War I. During those 60-minus years, any bank could present dollars to the U.S. Treasury and receive gold in exchange at a fixed price: $20.67 to the ounce.

The commitment was in practice a lot less rock solid than it seemed.

The American monetary system did not work very well in the 19th and 20th centuries, and repeatedly the U.S. crashed into crises that left international bankers doubting that the federal government could or would honor its obligations.

And for most Americans, the gold standard of 1873-1934 delivered pretty miserable results, including two terrible depressions (1893-1896 and 1929-1940) plus the long grinding squeeze of the deflation of 1873-1893. I don’t think it’s entirely a coincidence that the years of the U.S. gold standard were years of violent labor strife, radical ideology, attacks on the political system by a series of protest parties, and two presidential assassinations.

The U.S. quit the gold standard in 1934. While the dollar continued in theory to be defined as worth a certain amount of gold (1/35 of an ounce), in practice, a dollar was just a piece of paper. If you took your dollar to the U.S. Treasury and asked to exchange it for gold, they’d call the cops: it was made illegal for private citizens to own gold.

After World War II, the U.S., Great Britain and the other major capitalist economies negotiated a new international monetary order, often called “Bretton Woods” after the New Hampshire hotel where the deal was struck.

Under Bretton Woods, the U.S. agreed to exchange dollars for gold at the new price of $35 an ounce. But – and here’s the crucial part of the story, the part that the Wall Street Journal always omits to say – the only people allowed to make the exchange were other governments and central banks. If you or your cousin Ned presented yourself at the Treasury to exchange dollars for gold, they’d still call the cops: It remained illegal for private citizens to own gold.

And there’s more. The way the system actually worked, the two governments that accumulated the most dollars happened to be West Germany and Japan – the two countries most dependent on the United States to defend them against the Soviet Union. So if ever it happened that a German or Japanese central banker or finance minister had the idea to try to exchange dollars for gold at the $35 price, well, Treasury wouldn’t quite call the cops on them … but Treasury certainly had ways to change that central banker’s or that finance minister’s mind.

And there’s still more!

Bretton Woods was the most intensely managed, most statist monetary arrangement in the history of the world. It allowed countries to forbid their citizens to own foreign currency. (Most European countries had some form of exchange control until 1959.) It permitted all manner of other government activism. The whole system was backed by a world financial government, the International Monetary Fund, empowered to make loans to any country that found itself short of foreign currency.

The years of Bretton Woods were years in which the internal economies and financial systems of the major capitalist countries were regulated as seldom before and never after in peacetime history. In the U.S. for example, the federal government regulated the price of every airline ticket, every ton of freight moved by rail or truck, and the interest paid on checking accounts, among many, many other interventions. The years of Bretton Woods were also the zenith of the union movement, with almost one U.S. worker in 3 belonging to a union. By all economic theory, those years should have been a total disaster.

Instead, they were a time of a dazzling – and unprecedentedly broadly shared – prosperity in the U.S. and Western Europe.

The response of the Wall Street Journal editors to this experience was audacious and ingenious:

They redefined a 40-year period in which private gold ownership was a crime as the zenith of the American gold standard. And they then credited that re-conceptualized gold standard with all the prosperity that their economic theory insisted should not and could not exist.

Bold.

Update:

To be clear:

I feel no nostalgia for the Bretton Woods economy, despite the good results it delivered in the three decades after World War II.

To sustain the Bretton Woods system required not only high – but ever increasing – levels of domestic and international financial regulation.

Through the 1960s, Presidents Kennedy, Johnson and Nixon added rule after rule intended to keep U.S. trade in balance, to prevent dollars from accumulating overseas, and to deter foreign governments from presenting dollars in demand for gold.

Under the classical gold standard of 1873-1934, the United States would have accepted a domestic recession (even a depression) in order to quash domestic demand, balance trade, and end the outflow of dollars. But that was just not going to happen in the modern world, not in the US, not anywhere – and everybody knew it. The Bretton Woods substituted financial controls for the old painful remedies, but by the late 1960s, the controls were becoming even more painful than the alternative: allowing currencies freely to trade against each other.

The modern currency float has its problems. There is no magical monetary cure, monetary policy is a policy area almost uniquely crowded with trade-offs and lesser evils.

If you want a classical gold standard, you get chronic deflation punctuated by depressions, as the U.S. did between 1873 and 1934.

If you want a regime of managed currencies tethered to gold, you get regulations and controls, as the U.S. got from 1934 through 1971.

If you let the currency float, you get chronic inflation punctuated by bubbles, the American lot since 1971.

System 1 is incompatible with democracy, because voters won’t accept the pain inherent in a gold standard.

System 2 is incompatible with the free market economics I favor.

That leaves me with System 3 as the worst option except for all the others.

What irks me about the Wall Street Journal‘s version of history is the attempt to redesignate System 2 as System 1 – in order to avoid grappling with the dark side of either system. It’s ideological fantasy masquerading as monetary history.

One last footnote:

Ron Paul style libertarians offer their own false monetary history. Unlike the Wall Street Journal’s editorial page, which blurs the radical difference between the classical gold standard that prevailed before 1934 and the Bretton Woods system that succeeded it, Ron Paul libertarians blur the difference between the post-1873 gold standard system and the pre-Civil War system of bimetallism.

Before 1861, the U.S. treated both gold and silver as money: bimetallism. From the 1830s to the Civil War, the U.S. attempted to operate this bimetal system without even a central bank to act as regulator during expansions and lender of last result during contractions. The result was the worst of all possible worlds, combining hysterical bubbles with shattering depressions – two in just 20 years, 1837 and 1857 – all of it haunted by chronic shortages of metallic currency. As a result of the chronic shortage of gold and silver in the pre Civil War period, “money” for most people meant paper currency issued by state banks – currency that (at best) lost more and more of its value the further it moved from its home market and that (at worst) became completely worthless when the issuing bank failed, as the issuing bank so often did.

Imagine living in a world in which you opened your wallet every morning and confronted a sheaf of money issued by different banks. Imagine a world in which you had constantly to calculate the exchange rate between Citibank dollars and JP Morgan-Chase dollars. Imagine a world in which you could only paper your rec room with the leftover worthless dollars issued by Washington Mutual. That gives you some taste of what the monetary arrangements of the pre Civil War U.S. were like.

Just generally, whenever anybody praises an arrangement from the past, it’s a smart idea to ask: “If this system was so great, why did people abandon it?” The answer should contain sufficient warning for all but the most infatuated cultists.

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61 Comments so far ↓

  • Oldskool

    As paranoid and dastardly as he was, I kind of miss his beady eyes and twitchy grin. I’d gladly take two Nixons in exchange for what one Shrub managed to do.

    • booch221

      Yes, Nixon was our last liberal President. In his second term he was pushing for a universal heath insurance plan far more sweeping than Obamacare. Imagine if that had been enacted in 1974!

      Nixon’s crimes were far less than W’s crimes, like torture, and outing a CIA agent, (which is treason). If only Ford had won the election of 1976, there would have been no Jimmy Carter presidency, no Ronald Reagan presidency, and certainly no W. Bush….***sigh***

      I say this as someone who was delighted by Nixon’s downfall at the time, and delighted by Ford’s defeat at the hands of Jimmy Carter. Be careful what you wish for…

      • Carney

        The “outing the CIA” agent gibe is a tower of lies.

        The narrative is, Joe Wilson was about to expose the coming Iraq War as based on a knowingly false premise of Iraq seeking WMD. So Bush had a minion out Wilson’s wife in retaliation.

        In the physical real world, rather than the fantasies of leftists, the leaker was Richard Armitage, leaking to Bob Novak, both of them OPPONENTS of the Iraq War. Thus the claimed motive totally fails.

        I understand this massively inconvenient fact will be heard, understood, and then pushed out of your mind, so you can go right back to the emotionally satisfying 2 minutes hate of whipped-up high dudgeon about so-called “treason”.

        While, of course, carefully ignoring the left’s efforts to undermine our war effort and help the enemy cause.

        • Oldskool

          Two words: “fair game”. Go look em up.

        • Primrose

          Presenting the facts before we decide to go to war is not “harming the war effort and helping our enemies.” It is presenting facts and deciding if we should go to war. Flesh and blood men and women die in war so the decision to wage it should be careful and honest, not a form of entertainment or ego-pumping. That means paying attention to the facts at hand. One of the key arguments was that Hussein was in the process of building a nuke. Evidence for that was the materials “gathered”—which were not actually gathered.

          Clearly, we should not have gone to war. Hussein did not pose an immediate threat. We were not done with Afghanistan, which did pose a threat. and is known historically for being very difficult to conquer, i.e. the nickname graveyard of empires.From a military perspective, we should never have taken our eye off the ball there. Only an outright emergency could have justified starting another war.

          Even if Hussein had had a Nuke, I don’t see why a full-scale war there was necessary, as opposed to under the radar, special forces projects. It was complete madness. Anyone trying to prevent us from making such a mistake was serving his or her country well.

          If Armitage was the one who leaked, why didn’t the Bush administration punish him? Leaking the name of a CIA agent is a crime.

  • Graychin

    Wage and price controls? Yes, I remember them and what a disaster they were. You don’t have to dig very deep to figure out why Nixon’s economic program was a train wreck. Whatever happened to free markets?

    Wasn’t Nixon a Republican? Yes, I believe he was.

    • booch221

      Nixon’s wage and price controls and the entire New Economic Policy were nothing more than an effort to juice the economy for the 1972 election. And it worked.

      It was never meant to do anything else–except re-elect Richard M. Nixon, regardless of how much damage it caused to the economy in later years. They knew it was bad policy when they enacted it. Short-term politics at its worst!

      • ottovbvs

        “Nixon’s wage and price controls and the entire New Economic Policy were nothing more than an effort to juice the economy for the 1972 election. And it worked.”

        There’s some truth in this and it along with the surge in commodity prices (notably oil) were really the source of the great inflation that occurred in the Carter/early Reagan period that was ultimately choked off by the tight money policies of Volcker. Carter got the blame for most of this which is how the cookie crumbles but he wasn’t really responsible and he did appoint Volcker arguably the best Fed chairman ever.

  • ottovbvs

    Frum, I must confess to some admiration for your honesty. The WSJ oped was utter nonsense. FDR took the US off gold, period. Yes you can argue that Bretton Woods by establishing a fixed rate for all currencies against the $ provided a tenuous link to gold but the emphasis is on tenuous. The intellectual dishonesty of these folks at the WSJ never fails to amaze me. But you’d know all about that wouldn’t you?

  • indy

    Next up, professional wrestling isn’t real.

  • JimBob

    Frum, you’re a buffoon . What do you think we were on from 1787 up to the Civil war??? It wasn’t the classical gold standard, but the domestic gold standard. From 1787 up to 1933 with a twelve year break so Lincoln could print the money for his war people could take their paper money and exchange it for gold. Then the first creeping socialist FDR stole the peoples gold . In 1944 Bretton Woods was born where again the dollar was defined in gold. When Nixon closed the gold window our debt was 400 billion. Now without the discipline of gold our debt is 14.3 trillion.

    In 1913 the last year of the classical Gold standard a twenty dollar bill would buy a one night stay at some of the finest Hotels in New York City. Today twenty dollars won’t buy you a one night stay at the biggest flop houses in New York. In 1913 the American people could take a twenty dollar bill and exchange it for 1oz of gold. Today at 5pm New York time 1oz of gold is 1734 dollars which will buy you a one night stay at some of the finest Hotels in New York city.

    Richard Nixon David Frum both idiots.

    http://www.forbes.com/sites/charleskadlec/2011/08/15/nixons-colossal-monetary-error-the-verdict-40-years-later/

    Gold means freedom

    http://www.youtube.com/watch?feature=player_embedded&v=RvL_Dm2d99A

    • Sinan

      Jimbob….you need to get a book called “Lords of Finance”. I think you will enjoy it tremendously since you like the subject and apparently know nothing about it.

      • ottovbvs

        Lords of Finance is a fantastic book which was written by my daughter’s former boss. It’s just about the best layman’s guide to what happened in the 20′s and 30′s I’ve ever come across. Jimbo’s new enthusiasm for Bretton Woods is made doubly hilarious by the fact that it’s main author was his customary bete noir John Maynard Keynes who according to Jimbo was wrong about everything.

    • JohnMcC

      Mr Bob, I refrain from picking out individuals and belittling them. You have come close many times to pulling me over the edge…. I have refrained from engaging you on a personal basis. Isn’t my style. Because I was born in the South. Actually–I was born in Montgomery, the ‘cradle of the Confederacy’. And the Southern way is deeply in me. But, let me break from my southern retiscence….

      You say: “…with a twelve year break so Lincoln could wage HIS WAR…” (caps are mine)….

      You are the beneficiary of Mr Lincoln. Mr Lincoln was far far beyond your small mental structure and ‘his War’ was a struggle to see a nation live up to it’s founding ideals. By dashing by the period of ‘green-backs’ and the Union’s willingness to suffer unparalleled losses of blood and money to fight the War between the States, you are degrading the entire American experience of trying to live as one nation.

      You, sir, are a disgrace. You should never speak in decent company again — had you any decency.

      Mr Lincoln ranks with Ghandi. He ranks with Churchill. He ranks with Ceasar. He ranks with Pope Gregory and he ranks with the English Barons who wrested the Magna Carta from King John.

      And you, sir, are a worm.

      • ottovbvs

        While I agree with every word you say John McC it’s an unfortunate fact of life that blogging is subject to a sort of Gresham’s Law of Money where silly, childish, ignorant and angry bad discourse drives out good. The authors of this bad discourse are simply oblivious to obviously sincerely felt sentiments like yours. Faced with this reality I can only suggest they are either ignored or treated to some mild ridicule. They really are worth no more.

  • indy

    Jimbob is comedy gold. Would he be worth more or less in 1913? And how much would you pay to exchange him at a window? Any window will do, but in general the higher the better.

    • JimBob

      You can’t refute one thing. You can’t. That’s why you’re a loser.

      • indy

        Sorry, Jimbob, but I never learned the ‘old man yells at clouds’ dialect of incoherent.

        P.S. You guys owe me for all this entertainment.

      • sweatyb

        What’s to refute, Jimbo? You basically regurgitated the WSJ’s oped piece that Frum critiqued but without the pretense of coherence.

        You don’t understand macro-economics.

        • JimBob

          Haven’t even read the WSJ piece Frum is writing about.But I did read Frum’s bull shit. He is all but saying Bretton Woods is responsible for all the regulation that FDR and Truman slapped on the economy . And he’s trying to get away with the canard that the Gold Standard caused the Great Depression. When Frum wants to try and debunk the gold standard from a free market perspective he brings up Milton Friedman. But Milton Friedman blames the great depression on the Federal Reserve not the gold standard.

          Even Milton Friedman saw the light!!

          “In making the case for a monetary rule, Friedman advocated a paper-money standard rather than the gold standard, arguing that this would save on the resource costs of digging the metal out of the ground just to store it away in bank vaults. But in the years after he received the Nobel Prize he had second thoughts about his monetary rule and the gold standard. In a series of articles in the 1980s Friedman stated that Public Choice theory had convinced him it will never be in the long-run interest of governments or their monetary authorities to follow the type of rule he proposed, since the temptation to abuse the printing press for political reasons would always be too strong. He therefore concluded that, given the actual history of Federal Reserve policy in the twentieth century, remaining on the gold standard would have been far less costly for America than the Fed-created inflations and recessions.

          http://www.thefreemanonline.org/featured/milton-friedman-1912-2006/

        • Bunker555

          JimBoob,

          You’ve been drinking too much at the Wall Street Urinal.

        • Kenneth Silber

          Milton Friedman did some rethinking about money in the 1980s as described at http://www.fff.org/freedom/0399b.asp. But he still didn’t favor a gold standard, writing in 1986:

          “I regard a return to a gold standard as neither desirable nor feasible — with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct.”

      • valkayec

        Yeah, and in 1932 a nickel could buy a loaf of bread or $0.15 a pound of coffee. Ever heard of inflation?

        • JimBob

          Silber, Friedman did not support a Gold Exchange system like Bretton Woods. Or a government controlled Gold Standard. But he did favor free market money. Letting the market deliver our money. Gold and Silver

          “And Friedman also emphasized his political-philosophic view of such a gold-based monetary system: “A real gold standard is thoroughly consistent with [classical] liberal principles and I, for one, am entirely in favor of measures promoting its development.”

          “It’s not clear that we should,” Mr. Friedman says. “We don’t need a central bank to have money. We had money before there was a central bank.” (The Fed was established in 1913.) “So I agree, we don’t need a central bank.”

          He argues that Citibank and Wells Fargo, for instance, could issue their own currencies, provided that they be exchangeable for something else of value — perhaps gold. The government’s role would be limited strictly to replacing today’s dollar bills as they wear
          out.

          http://www.nationalreview.com/articles/204919/friedmans-close/deroy-murdock

          It is called Free Banking which is very consistent with a gold and silver monetary system. Free Market money

          http://www.freebanking.org/

        • JimBob

          In their impossibly good book Money, Markets, and Sovereignty (2009), Benn Steil and Manuel Hinds make the point that over the last four thousand years, the only period in which humanity has not consistently based its currency in metal, specifically gold, is the last forty. That’s right. Ever since President Richard M. Nixon announced forty years ago today, on August 15, 1971, that the U.S. would no longer officially trade dollars for gold, we have been enjoying a new era of human history.

          http://www.forbes.com/sites/briandomitrovic/2011/08/14/august-15-1971-a-date-which-has-lived-in-infamy/

          400 billion national debt in 1971 to 14.3 trillion today. Twelve men and women deciding what interest rates should be and how much money the economy needs has been a disaster for the United States.

          Utah has legalized Gold and Silver as legal tender and 15 more states are looking at the idea. In Utah Gold coins are worth their market value not the bogus 50 dollar face value the treasury puts on it.

        • Kenneth Silber

          Friedman said different things at different times, even in that National Review piece you cite. His first statement, about setting monetary policy on an automatic 3% increase per year, was a recurrent theme of his, far more so than his suggestion about private currencies. But in light of Perry’s recent remarks, I say let’s give it a try — in Texas. Let Chase, Wells Fargo etc start issuing their own currencies there, while the federal government limits its role to destroying old money. Then if that doesn’t destroy the Texas economy, we can consider it extending it to other states. It’s called federalism.

  • gmckee1985

    Nixon, 2nd worst domestic Republican president of the 20th century. Behind Hoover. And on the lower end of presidents overall, in the category with LBJ, FDR and Carter.

    • Oldskool

      Lucky for the rest of us, historians are the ones with credibility when it comes to rating presidents.

  • gmckee1985

    Just goes to show you that high intelligence doesn’t always correlate into a successful presidency.

    • ottovbvs

      You may not like it but there’s no doubt that FDR, LBJ and Truman essentially created modern America. This is why FDR has long been in the top three, Truman’s reputation has steadily climbed and he’s now always in the top ten, and LBJ’s reputation is starting to climb.

      • Demosthenes

        Even though it was the entry of the Soviets into the war against Japan, and not Hiroshima, that was ultimately responsible for the Japanese surrender, I can understand Truman’s decision to drop the first atomic bomb. That is, I can understand it to an extent, given the military realities of the time.

        Nagasaki was completely indefensible, and for that reason (fairly or unfairly, perhaps even that reason alone) I believe history will judge Truman among the worst Presidents of the United States.

        • ottovbvs

          “I believe history will judge Truman among the worst Presidents of the United States.”

          You can believe whatever you like but Truman’s reputation has risen steadily since he left office and he’s never out of the top ten in these historian polls these days. The fact you think it was Russian entry into the war against Japan that precipitated Hirohito’s decision to bring the war to an an end suggests a somewhat distorted view of events. Whatever, the rights and wrongs of the decision on dropping the second bomb (where as happens I agree with you) Truman proved a sure and steady hand in the postwar period when for the first time man had the power to blow the planet to kingdom come. He essentially presided over the the creation of the strategies and institutions that were ultimately responsible for winning the cold war; handled the demobilisation well and desegregated the military; put Europe back on its feet with the Marshall plan; fired MacArthur when he wanted to start a nuclear war with China; faced down Russia over the Berlin airlift. I also admire enormously the humility of the man. After he left office he went back to hometown and took up where he left off. No pension, no security details, a truly great man.

        • Oldskool

          You probably noticed when Shrub’s people were desperately trying to cast him as another Truman. So far, no sober person has fallen for it.

        • Demosthenes

          somewhat distorted view of events

          I would argue that any distortion lies in the view that Hiroshima played a greater role than the entry, on 8 August, of the Soviets into the war. It is true that the military command downplayed reports of the size of the offensive, however it was also true that Japanese military strategy since before Pearl had always recognized the necessity of keeping the Soviets out of the Pacific. So it didn’t really matter if it was two kulaks with pitchforks coming at them, the fact that the Soviet Union openly violated the Non-Aggresion Pact signaled imminent defeat.

          Frank’s Downfall may not have been kind to “revisionist” arguments, but I think it would be impossible to argue from Frank to the conclusion that the Soviet entry had nothing to do with the Japanese surrender. At best, Hiroshima was a necessary evil; Nagasaki was just plain evil. And no, the responsibility is not solely Truman’s. But it colors my perception of the man, especially since–unlike practically everyone else who ever worked with or was in any way responsible for the bomb–he never expressed any regret about it.

          Aristotle argued that even when good men make bad decisions, that doesn’t make them evil men. I just don’t know where to place Truman; but then again I suppose, in the end, that it isn’t really my job to judge.

  • valkayec

    Mr Frum, what did you expect after News Corp bought the Journal? Editorial and journalistic integrity?

  • macacanadian

    “If this system was so great, why did people abandon it?”

    The answer to that question usually is that the rule was probably not so great to the wealthy, so they drowned it in the bathtub once everyone else forgot whatever painful event brought the rule about in the first place.

    And now here we are.

    It is interesting to note that you still love your free market baby, even though reality objects to it.

  • Carney

    I don’t know that I buy the gold standard or JimBob’s line either, but at least he has facts and logic that he posts.

    The hoots, jeers, and insults heaped his way say MUCH more about those issuing them, than about JimBob or his stance.

    • beleg

      Yes, they say that people are finally learning not to feed the trolls.

    • ottovbvs

      “but at least he has facts and logic that he posts.”

      Yeesss, I can see that they’d have enormous appeal to someone with your powerful and probing intellect Carney.

    • indy

      It doesn’t surprise me that you consider misleading third party ‘summaries’ of Friedman’s views and writings as ‘logic’ and ‘facts’. That doesn’t say anything about you at all.

    • JimBob

      Basically most of the regular posters here suck off the government one way or another. Government employees parasites.

      • ottovbvs

        “Government employees parasites.”

        Heh Jimbo tone down the hate speech will you. Obscenities are one thing but this is going waaaayyyyyyy too far.

  • Holmes

    Frum despises the intellectual dishonesty, and the sheer ugly viciousness, of Paul Gigot, the editor of the WSJ editorial pages. There is no lie that Gigot won’t tell. There is no calumny Gigot won’t stoop to. Everyone in conservative circles knows his warrior mentality (“winning the culture wars is always more important than telling the truth”) and most admire him for it. His lack of probity turns Frum’s stomach. We owe Frum for taking him to task whenever the WSJ publishes BS editorials, like this piece by Lehrman. Well done, David.

    • ottovbvs

      Holmes:
      Totally endorse this. I’ve read the Journal, when able to, for 50 years and the ed page has always been a bit screwy. It was notably so under Gigot’s predecessor Bob Bartley who was completely off his rocker and was one of the leading proponents of the Clinton murder conspiracy. When he left (he was terminally ill) Gigot replaced him and based on his appearances on the McNeil Lehrer Newshour (the spot now occupied by Brooks) was expected to remain conservative but bring a bit more sanity to the enterprise. In fact there has been no discernible difference, in fact arguably it’s got worse. This has nothing to do with Murdoch (although he is responsible for the deterioration in quality of the rest of the paper) since Gigot’s appointment preceded the takeover. Frum used to be one of the anonymous leader writers on the WSJ so I’m sure he knows score. Another was Michael Kinsley who famously described the atmosphere there in the Bartley era as “Stalinist.” This and the other pieces Frum has written is a great summary of the gold story and the bi-metallism period. His description of locally issued bank notes and the chaos in the monetary system is entirely accurate (I have a large number of them made up into a accent picture hanging in my library) and everyone must have seen those western movies where the THE BANK OF DEADWOOD is a prominent feature of mainstreet. Jimbo’s fond belief that the bank of Deadwood adhered to some “domestic gold standard” when issuing its own paper is hilarious. Good job David, you’ve really performed an educational service.

    • Oldskool

      Well said, but, who’s listening. There is no truthful version of the big media spin machine. People laughed when Hillary Clinton said there was a vast right wing conspiracy. No one is laughing now. Here in NC, the Koch brothers are taking over school board elections.

      • ottovbvs

        “Here in NC, the Koch brothers are taking over school board elections.”

        Well it’s quite widely said that George Mason University is a wholly owned subsid of the Koch’s.

  • Primrose

    What I don’t really understand is why the gold standard is considered more real than money. Gold has very little intrinsic value or use. In the end, Gold is valuable because people say it is—same with money. The only reason gold has been used longer is that the printing press was invented after metallurgy.

    It doesn’t matter whether you use gold, paper money, digital credits, beads or wampum, none of it is worth any more or less than we assign to it.

    • JimBob

      Over four thousand years of history.

      • ottovbvs

        Estimated world populations

        2000 BC…..200 million

        1500 AD……450 million

        2011 AD……7 billion

      • DeathByIrony

        This would be an “Appeal to Tradition”, a fallacious argument without any actual merit.

      • Primrose

        And that means what? The value of gold is as much a symbol as money. That is an older symbol doesn’t make it more real. The Ankh has been around longer than the cross but I presume the cross is a much more important, powerful symbol for you than the Ankh.

  • ottovbvs

    “If you let the currency float, you get chronic inflation punctuated by bubbles, the American lot since 1971.”

    This btw is not strictly true for the US. Certainly the seventies inflation was chronic (although this was to some extent due to a rebalancing of the terns of trade) but since the early 80′s we’ve had the period of the great moderation when inflation has been fairly tame.

  • Bruce Bartlett On The Abrupt Demise Of The Gold Standard | Poison Your Mind

    [...] fellow excommunicated Republican, David Frum, criticizes the WSJ’s boilerplate conservative revisionist history on the gold standard: The story is worse than fantasy. To the extent that the story contains [...]

    • ottovbvs

      I hadn’t seen this summary of Bartlett’s which is entirely accurate about the events surrounding Nixon’s dismantling of BW.

    • JimBob

      I feel bad for Bruce Bartlett. His career was destroyed by vindictive Bushies after his book “The Imposter” came out. At one time he worked for Ron Paul and was an adjunct Scholar at the Ludwig von Mises Institute. Today he’s gone over the cliff

      • DeathByIrony

        The question is: You have to wonder what he was running from to jump off that cliff.

        You’ve seen Bartlett’s work. You’ve seen how he comports himself. Evidence suggests he will not espouse ideas past the point they begin to exist for their own sake. Might it be that von Mises is a system of thought that is internally consistent, but without practical application past the academic?

  • ottovbvs

    “Let Chase, Wells Fargo etc start issuing their own currencies there, while the federal government limits its role to destroying old money.”

    The new Texas Central Bank will of course be assuming it’s share of federal liabilities before it is cleaved from the whole?

  • gmckee1985

    There are people who believe Nixon was a better president than Bush 43 and Reagan? Wow…

    Nixon was a really liberal (i.e. shitty) president. Some of his policies make Barack Obama look like Calvin Coolidge.

    • ottovbvs

      Actually Nixon was not a disastrous president. Apart from that little misunderstanding at Watergate I suspect Republicans would be singing his praises to the sky. Opening up with China is one of the three or four big positive (note positive) US foreign policy events since the war. And at the time of course gmckee would have been falling over himself to tell us Nixon was being framed by libruls over Watergate.

  • gmckee1985

    There are people who believe Nixon was a better president than Bush 43 and Reagan? Wow…

    Nixon was a really liberal (aka shitty) president. Some of his policies make Barack Obama look like Calvin Coolidge.

  • Political Rants » Tea Party Hobbits

    [...] FRUM THE BARD: The original D&D’s rule about experience being based on the gold piece system was not as great as you imagined since none of the dice had huge modifier bonuses attached to them and experience awards were extremely random. [...]