The New York Sun has brought out its editorials on the dollar and the gold standard as a book under the title It Shines For All. The editorials are preceded by a short introduction by James Grant, the editor of Grant's Interest Rate Observer, and they are followed by excerpts from the Coinage Act of 1792.
The editorials are beautifully crafted and designed to make the point that, as one of them puts it, the gold standard "is not a flakey idea. On the contrary, it is fiat money that is the flakey idea."
If there's anything to complain about here, it's the occasional exaggeration or the impression one might get that monetary policy explains all. One editorial, of January 27, 2011, said, "It's our view that the difficulties our economy has been going through have their roots in the un-soundness — the fiat nature — of what currently passes for American money." Another of the editorials calls the collapse in the price of the dollar relative to an ounce of gold "a catastrophe that hurts all Americans, of all races, and imperils our civil society."
There's also an editorial that touts Alan Greenspan's comments on gold without mentioning that he's a paid consultant to the Paulson & Co. hedge fund, which has a big gold position.
At the heart of the Sun's case is the claim that, because of the fiat dollar, "we didn't have sound money able to transmit the accurate price signals that are needed for a free economy." Perhaps. But there has been no shortage of price signals even without the sound money, whether in declining housing prices or in soaring gold, silver, and energy prices. Somehow the price signals manage to fight their way through the monetary miasma.
And it's not necessarily clear that by giving the prices in gold rather than in dollars the price signals are more accurate. Take, for example, the federal budget. In 2000 it was about 6.6 billion ounces of gold; in 2010 it was about 3.1 billion ounces of gold. Is the federal government now really less than half the size it was at the end of the Clinton administration? Or is the budget's size in those fiat dollars — $3.7 trillion in 2010 and $1.8 trillion in 2000 — a more useful yardstick? It's true a dollar buys less gold than it used to, but it also buys more computing power and more long-distance phone calls than it used to.
One of the editorials calls on Congress to find "some way to assure that the rest of us who don't have gold clauses in our contracts can be assured of the value of our dollars." Yet nothing is stopping individual Americans from putting gold clauses in their contracts. Or from choosing to buy gold coins or bars with their savings, as indeed many have done (though the government has, alas, moved quite aggressively against a man who was coining his own currency). Or of using other techniques to protect themselves against inflation. Others choose to put their faith in the Federal Reserve; even the Sun has chosen to price the book at $14.95 rather than as some fraction of an ounce of gold.
This book is a fine way to get the pro-gold standard side of the debate; for the arguments against the gold standard, you'd have to look elsewhere.
When one really gets into these matters with Seth Lipsky, the editor of the Sun, who is, according to the foreword, the author of most of the editorials, one comes away with the impression that he doesn't really care all that much about gold, but that he cares an awful lot about the Constitution, which gives Congress the power to coin money, to regulate its value, and to fix the standard of weights and measures. And that he thinks that if the dollar is going to be defined on some other standard than that of gold, at least Congress should do the public the simple courtesy of explaining what that definition of a dollar is. Both points as sound as a gold coin.
Disclosures: I used to be the managing editor and a part-owner of the Sun, which now sometimes runs my column on its Web site. Before that, I worked with Mr. Lipsky at the Forward and at the Wall Street Journal. If you buy the book from the link above, as usual, this site gets a percentage of the revenues. For disclosures about James Grant, please see my review of his book Mr. Speaker!