(This item originally appeared at Forbes.com on October 26, 2017.)
The purpose of James Ledbetter’s new book, One Nation Under Gold (2017) is to convince you that anything to do with gold – especially basing your money on it – is folly, superstition, mania, obsession, and madness. We know this because he tells us so, in the introduction:
Fixing our money to gold and amassing great stacks of it is no more a guarantor of sustained economic health than a witch doctor’s potions. And, as with religion, what gold believers do can often resemble, in the eyes of the less devout, madness and destruction. From the earliest days of the American republic, gold blinded men from seeing the financial realties around them. And it brought with it all manner of fraud and false hope, gold by-products that are still with us today. … To avoid gold’s false paths, we need to argue with the past, to test the assumptions that are too often and too casually passed uncritically. This book, I hope, is that argument.
“Witch doctor’s potions”? Really? The dollar was worth $19.39/oz. of gold in 1792; in 1914, it was almost unchanged at $20.67/oz. During this time, the United States was the most successful country in the world, rising from thirteen war-torn colonies along the Atlantic coast to command most of an entire continent, along the way going from crude subsistence agriculture to the world’s leader of industry, the wealthiest and freest people the earth had ever seen. After 125 years of money based on gold, America had achieved greatness; after 46 years of a floating fiat dollar, today we wonder how to make America great again.
It wasn’t just the U.S. During the century before 1914, those countries that firmly embraced the principle of gold-based money – Britain, France and Germany – had the best economic performance, and, between them, ruled the world. The countries that had long bouts of floating currencies – Spain, Greece, Portugal – stagnated along the margins, while greater powers disassembled their once-mighty empires. When a country went from a floating currency to a gold standard – the U.S. in 1879, Russia in 1898, Japan in 1897 – a burst of strong economic progress followed. The lesson learned from this was pretty clear, and had nothing to do with superstition.
This would be a pretty interesting tale to tell, but Ledbetter did not tell it. Instead, he focused on the California gold rush that began in 1848. The mining business (including copper, lead and tin, plus oil, gas and coal) has always been a playground for adventurers, rogues and charlatans, often exploitive of workers and an environmental blight. The gold mining business is no better. But, it turned out that gold mining, and the use of gold as a basis for money, never had much to do with each other. Annual gold production today is the highest it has ever been, and roughly double what it was in 1971, the end of the Bretton Woods gold standard system. Roughly half of all the gold ever mined, in human history, has been mined after 1971.
Ledbetter then focused on a series of crises in 1893 and 1896, intimating that they had “something to do with the gold standard.” Indeed they did – they were caused by various threats, by Democrats and Republicans alike, to devalue the dollar by about 50% and then let it float vs. gold, known at the time as “free coinage of silver.” Wouldn’t you panic if members of both political parties threatened a devaluation of this sort? The election of pro-gold president William McKinley in 1896 put an end to the crisis, ushering in two more decades of powerful economic growth.
Ledbetter followed with sections on the devaluation of 1933, when it was made illegal for U.S. citizens to own gold bullion; the Bretton Woods era; and some interesting details regarding the re-legalization of gold ownership during the 1970s. Much of this is valuable historiography, although, reinforcing Ledbetter’s stated intent to portray anything gold-related as being tinged with madness, it tends toward the clownish and absurd, including the legal adventures of a solid gold statue of a rooster that authorities claimed too-closely resembled a (then-illegal) bullion ingot; and some speculation that bismuth could be turned to gold with an atomic particle collider.
Harry Browne, the author of the hugely popular 1970 book How You Can Profit From the Coming Devaluation, was the target of more scorn from Ledbetter, who seems to have been blinded from seeing the economic realities of the time. The dollar was indeed devalued in 1971, going from its $35/oz. Bretton Woods peg all the way down to briefly touching $850/oz. in 1980, before stabilizing around $350/oz. in the 1980s and 1990s. Harry Browne’s followers enjoyed tenfold gains (in dollars) on their gold during the 1970s, while stock and bond markets swirled the toilet.
Glenn Beck, who was recommending gold on his TV show in 2009, later appeared for his share of tomato-throwing. The fact that gold was the best-performing asset class of the 2000-2009 decade, beating stocks and bonds worldwide, apparently meant nothing. It meant something to Glenn Beck; and indeed, gold did rise from around $1100/oz. in November 2009 to around $1900/oz. in 2011. There was good reason to think that the decade-plus bull market in gold (which, like the 1970s, was really a bear market in fiat currencies) had a lot further to go – a whole swath of European governments threatened to default in 2012, and the Federal Reserve, which had been quiescent for a while, began a new “quantitative easing” program that was its most aggressive yet. But, Mario Draghi of the ECB told everyone in late 2012 that he would “do what it takes” to make everything better; soon, bond yields went to their lowest in all of human history, the gold market fell like it was being beaten by a club; and stock markets everywhere levitated in a low-volume, low-volatility march to the skies.
I actually liked much of One Nation Under Gold, as it threw light upon certain historical episodes in an entertaining and readable way. But, I know enough already to be largely immune to Ledbetter’s agenda. Why all the gold-bashing? Ledbetter admitted that gold-based money remains popular in the U.S. He cited a 2011 poll among Republicans and Democrats combined that found 57% favored “returning to a Gold Standard if you knew it would reduce the power of bankers and political leaders to steer the economy.” Only 19% opposed. The American people still know the difference between success and failure: the Bretton Woods era, the 1950s and 1960s, when the dollar was fixed (somewhat precariously) at $35/oz. of gold, had the best economic performance, and the biggest gains by the American middle class, of the past century. Since the floating fiat dollar appeared in 1971 median real wages have stagnated, for the first time in American history.
The elites, however, are almost unanimously opposed. Ledbetter is, apparently, their spokesperson.