Review: One Nation Under Gold, part 5

Nixon ended all ties between the U.S. dollar and its gold stocks, but that didn't mean the issue was permanent, and gold ownership took a while to become widely popular. Today, it is more an element of Republican populism than a serious pursuit.

• Chapter 10: Legal at Last. Compared to international relations, economic affairs (including gold) were always a lesser concern for Nixon, and he was in no rush to resolve the ambiguity surrounding the dollar's relationship to gold. Once Watergate hit, it was no longer a priority at all. Nevertheless, a bill to legalize ownership made its way though Congress, and President Ford signed it in January 1974.
  
  Gold ownership wasn't a huge thing at first -- few were able to make such a significant purchase -- but South African Krugerrands helped popularize gold coinage. Krugerrands were 22k coins minted with 1 ounce gold and a small amount of copper. They were tangible, transferrable, and easy to assess in value. They were also a product of apartheid -- the South African gold industry was directly linked to its segregation practices.
  
  The anti-apartheid movement influenced some American businesses to steer clear of South African gold investments. As one 1977 editorial in the Berkshire Eagle concluded, "The security sought by the investor in South African gold -- which might in any case be less secure than imagined to the to fluctuating world price of gold -- is bought at the expense of a majority whose only security is the peace of the grave."
  
  Despite presidential promises, delinking the dollar from gold and legalizing gold ownership did not bring prosperity, restore the dollar, help control inflation, or create jobs. And as a commodity, like any other it didn't even bring consistent returns on investment.
  
  
• Chapter 11: Goldbugs in Power. Disconnecting the dollar from gold fixed the balance-of-payments problem, but failed to fix the economy. Reagan-era Republicans thought a return to "hard money" was worth considering. In 1977, a legislative rider ended the prohibition against gold clauses, but this affected little -- by this point, too few people understood the implications to bother fighting it.
  
  When Reagan took office in 1981, Republicans began a "Gold Commission" (actually signed by Carter before his term ended) tasked to tasked to evaluate "the policy of the United States Government concerning the role of gold in domestic and international systems." It was a fairly anodyne statement, but for Republicans the purpose was clear -- they were to use this as a public forum to push for a gold standard.
  
  Yet the proceedings were far from energizing. First, they had a hard time coming to an agreement on what "gold standard" even meant -- a 1990-style gold coin (Ron Paul's preference), a 1935-style gold bullion, or a 1945-style gold exchange standard. The more practical the solution, the less ideologically pure the options were. [Gold Panel off to Slow Start]
  
  Then they had a hard time finding credible economists who were willing to speak on the matter. Even conservative economists like Allan Metzer, in his "Epistle to the Gold Commission" told them a gold standard wouldn't accomplish what they wanted it to.
  
  

  "The gold standard is an idea whose time is past -- long past. Advocates of a return to the gold standard offer their nostrum as a means of stabilizing prices but offer few details about how this goal would be reached. All that we are usually told is that the gold standard is a 'supply-side' solution, a radical change that will reduce interest rates, stabilize prices and eliminate the summer's excess supply of zucchini. None of these claims is true."

  The Commission examined a variety of proposals, only to determine that they were wildly impractical. Considering the international nature of trade and finance meant, the possibility of returning to a gold standard of any type was little more than dream.
  
  While a return to "hard money" remained popular in concept, it was little more than political shorthand for conservative politics: lower government spending (especially on social programs), a balanced budget, and a reliance on market forces. The power of gold's symbolism had gone beyond what the metallic commodity could do.
  
  Even such former stalwarts as Fed Chairman Alan Greenspan could muster only a tepid response:

  "...if the key conditions could be replicated we might be well served by such a standard. However, considering the huge block of currently outstanding dollar claims in world markets, fixing the price of gold by central bank intervention seems out of reach."

  Yet the Gold Commission's greatest accomplishment was to recommend the minting of gold coins similar to the Krugerrand. In an executive order declaring a national emergency, Reagan explained "the policies and actions of the Government of South Africa constitute an unusual and extraordinary threat to the foreign policy of the United States."
  
  He targeted the Krugerrand specifically. "The Krugerrand is perceived in the Congress as an important symbol of apartheid. This view is wide shared by the US public. I am directing this prohibition in recognition of the public and congressional sentiments."
  
  Consequently, one-ounce gold coins became available in 1986, which helped change the relationship between South Africa and the United States. Krugerrand sales fell -- replaced by U.S.-made Liberty coins -- and South Africa now a competitor of the U.S. (rather than a critical gold supplier) it became increasingly isolated, leading to the end of apartheid. The move also reinvigorated the domestic gold mining industry, which grew 500% between 1980 and 1990.
  
  Republicans continued to mix populism with Old Right conservatism. So even though the Gold Commission recognized a gold standard of any sort was poor policy, it still made for useful politics. Thus, they continued to include at least some mention of a gold standard in their platform all the way to 2016.
  
  
• Chapter 12: God, Gold, and Guns. On November 23rd, 2009, as the U.S. was dealing with the Great Recession, Fox News commentator Glenn Beck said that in the event of an economic collapse, Americans would need "God, gold, and guns." Beck's advocacy for gold was suspicious, given that even when he was being boycotted for incendiary language against Obama, gold advertisers stood by him. Beck promoted gold, and gold promoted Beck.
  
  One of Beck's advertisers, Goldline International, was implicated for irregular sales practices and refunded $4.5 million to its customers to settle a lawsuit. [Source] Even today, gold marketers are among Fox's most dependable advertisers.
  
  While conservatives continue to support a role for previous metals and give lip service to the idea of returning to a gold standard, it remains an impossible dream. Similar to a rejection of Microsoft Windows and a return to DOS (Disk Operating System), such a move would create more problems than it would solve. Moreover -- given it could only happen in a crisis -- it would most likely be both poorly-argued and poorly-executed.
  
  As Kenneth Dam, a University of Chicago professor put it:

  "The case for a gold standard is most appealing when inflation is rampant but, paradoxically, rapid inflation makes a gold standard impracticable."