Financial History Issue 127 (Fall 2018) | Page 38

BOOK REVIEW  BY DANIEL C. MUNSON “One Nation Under Gold” By James Ledbetter Norton-Liveright Publishing, 2017 369 pages with notes America’s fascination with gold is a long and complicated tale, and James Led- better’s One Nation Under Gold is a good way to begin to understand it. Gold’s lus- ter and beauty have mesmerized Ameri- cans—and their government as well; gold was an organizing force through much of the nation’s financial history. To illustrate this, Ledbetter connects the booms and busts in the American economy to the gold markets. Ledbetter asserts that the Founding Fathers disliked and distrusted paper money. Gold was always preferred—Led- better quotes a 19th-century government official attributing this preference to God’s will—but dependence on gold for com- mercial transactions had consequences. The California gold rush that began in 1848 filled the nation’s bank vaults with gold, and as it did the banks lent freely against it. Ledbetter quantifies the boom: $155 million worth of gold was mined in 1853, up 10-fold from the amount mined in the 1830s. Things came to a smashing stop in late summer 1857 for various reasons, including the wreck of the USS Central America in a hurricane off the Georgia coast that September, which took thou- sands of pounds of California gold (and 400 passengers) bound for New York to the bottom of the Atlantic Ocean. The United States abandoned gold dur- ing the Civil War in issuing unsecured paper “greenbacks”—but only as a war expedient. Ledbetter describes gold’s move to the center of American political debate during the last three decades of the 19th century. Eastern banking inter- ests favored gold-backed money, while western agricultural interests favored the minting of dollars with more plentiful silver supplies to help buoy farm prices. Banking interests generally prevailed. The economic slump that began in 1893 sharpened the oratory of these western “populist” politicians. Ledbetter spotlights Nebraskan William Jennings Bryan, who rose to speak at the Democratic National Convention in Chicago in July 1896 against this gold-backed money, or “gold standard” system, just as prospectors were about to strike gold in the Yukon. He told the conventioneers, “We shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold!” It was artful and biblical, but it was too late: a stampede to the Yukon would soon cause another surge in the nation’s monetary gold stores. The political push for broader-based money subsided. Political ironies abound in Ledbetter’s tale. Opposition to Franklin Roosevelt’s New Deal efforts to abandon the gold standard and increase dollar-denominated prices was often most strident in the farm- ing/ranching parts of the country where such price increases were most needed. 36    FINANCIAL HISTORY  |  Fall 2018  | Unmentioned in Ledbetter’s US- focused account are the practical origins of gold’s monetary role. Beautiful and rare it is, but gold’s density—19.3 grams/ cubic centimeter, almost twice that of lead—make it difficult to counterfeit and easy to store, features that appealed to medieval bankers. Gold’s ability to retain value also goes largely undiscussed. FDR’s 1934 re-valuing of the dollar to $35/oz. of gold and discontinuing dollar convert- ibility into gold (for Americans) Ledbetter characterizes as a welcome break with eco- nomic orthodoxy, but the dollar’s decline in value since is not detailed. Ledbetter describes the US govern- ment’s difficulties in the 1960s with Bret- ton Woods arrangements, but not the underlying problem of dollar decline. The change in the Consumer Price Index (CPI) since 1934 has been about 1,900%—an average of 3.6% per year. If it tracked the index, gold would trade today for $670/oz. The current price is roughly $1,200. Gold’s uncanny ability to retain value over long stretches is worth mentioning. Gradual, decades-long trends make for poor television, and Ledbetter discusses the gold pitchmen of our era: the Alderd- ice brothers, Glenn Beck, Goldline Inter- national spokespersons—people who have touted not gold’s ability to retain value but its “get rich quick” potential and survival- ist cachet. Their ads have been successful (in the case of the Alderdice brothers, right up until they were arrested) because, as Ledbetter persuasively asserts, gold cap- tures the imagination of an authority- questioning, freedom-loving people.  Daniel C. Munson works as a chemical engineer and enjoys reading and writ- ing financial and scientific history. His columns have appeared in Barron’s and other publications. He is the author of Malice Toward None: Abraham Lin- coln, the Civil War, the Homestead Act, and the Massacre—and Inspiring Survival—of the Kochendorfers (2014).