A Monetary Bonanza

A point of departure fifty-two years ago today.

Atlanta, GA

August 15, 2023

Anyone with eyes to see or ears to hear has sensed for a while that the world is going to Hell. In recent years, the handcart picked up speed, with many hands on the wheel and feet on the accelerator.

Regardless who’s at the controls, it seems to get hotter, with flames rising everywhere. But I think we can finger an arsonist. On this day fifty-two years ago, a match was struck, and the fire continues to burn. 

That night, President Nixon interrupted Bonanza to tell the world he was severing the dollar’s link to gold. This ushered in the era of funny money and floating exchange rates, which devalued the dollar, suppressed savings, raised time preferences, and spurred spending. Gratification was in. Delaying it was out.

History shows that the quality of morals correlates with caliber of currency. Like synchronized dance partners, they tend to waltz or wobble in tandem, regardless which one leads.

The last half century of wars, boondoggles, bailouts, stimulus, subsidies, lockdowns, the Designated Hitter…and their accompanying litany of social ills…could’ve been curtailed or cauterized had gold remained a taut tether anchoring the ship of state.

To paraphrase historian Paul Johnson, the modern world began on August 15, 1971.

It seemed a normal enough day. Around the country families enjoyed familiar Sunday routines. We can imagine a typical scene.

It was the Feast of the Assumption, and began accordingly. In Catholic families, Our Lady was honored. Rosaries were prayed, Masses heard, respects paid. Returning home, grace was said, as prelude to a large mid-day meal.

Laughter, argument, food, and drink raised spirits and filled bellies. As dinner ended and evening approached, thoughts of the coming week crept in, an unwelcome encroachment on the weekend respite.

In the kitchen, dishes were put away, but the booze stayed out. In the living room, feet went up as the sun went down. Before they did, they walked across the room, and turned on the TV. It was Sunday night in the early 70s, and this was America. It was time to watch Bonanza. 

Many claim that the thirties started on October 29, 1929, that the sixties didn’t begin till November 22, 1963, and that the twentieth century didn’t really end till September 11, 2001. 

Those were all obvious points of demarcation, and departure. Clear before-and-after moments for those who lived thru them, and retrospective ones for those who followed. They represented distinct thresholds from one mood to another, like stepping suddenly from the Hall of Mirrors into a bed of manure.

On August 15, 1971, the need for hip boots was not so obvious. But in retrospect, the gilded reflections started to fade, black flies grew thick, and…like a foul odor from the stables on the Ponderosa Ranch…a distinct stench began to rise. 

That evening, President Nixon pre-empted the Cartwrights to tell Americans their prices would be fixed, and to inform foreigners their gold would be confiscated. For the first time since Roosevelt stole gold from his own citizens, the US government explicitly repudiated its debt so it could continue implicitly doing so.

Nixon assured his impatient audience that, if they wanted a real bonanza, these banana-republic maneuvers were temporary yet necessary. The price of goods would soon be unleashed, but the price of the dollar has remained untethered.

As Milton Friedman said, there is nothing so permanent as a temporary government program. Unfortunately, Uncle Milty was all for this grotesque, slow motion heist, which continues to this day.

Yet despite its persistence and acceleration, the robbery is rarely part of political dialogue. We hardly debate it, and almost never discuss it. It simply doesn’t come up.

We are allowed to argue whether tax rates should be 39.3% or 34.2%. That’s fine. What we aren’t permitted to contemplate is whether an income tax should exist at all, or if a state-sanctioned cartel should be able to destroy society by counterfeiting the currency.

So we don’t.

Whoever is president, regardless which party controls the Congress, phony money is the key to everything. It opens the door to endless wars, twin deficits, arbitrary lockdowns, crony corruption, pork barrel boondoggles, financial bubbles, Wall Street bail-outs, Main Street decay, and cultural corrosion. It is the fetid fluid of the Deep State swamp…the ultimate source of political patronage, crony connections, and insider wealth.

This foul “liquidity” shortens time horizons, sacrifices saving, discourages production, and washes away even the pretense of limits. And it pushes civilization to the brink, which we seem to be nearing now. 

But the subject is never on the ballot. Both sides favor the debasement and its bounty, so would rather talk about something…anything…else. So they do. And they insist we do too.

No society…whether ancient Rome, revolutionary France, Weimar Germany, or modern Venezuela…that has peered into the monetary abyss has failed to fall.

So the US government has taken a different approach…that of Wile E Coyote.

It’s decided not to look.

JD