My usual early warning system for books about the dollar consists of the New York Sun and the Wall Street Journal. This time, though, it's, of all places, National Public Radio's "Morning Edition" that has the scoop on a new book, Paper Promises: Debt, Money, and the New World Order, by Philip Coggan, who is the "Buttonwood" columnist of the Economist. The NPR article begins:
Financial writer Philip Coggan traces the current global financial crisis to the 1970s, when the U.S. went off the gold standard.
"Up till then, every form of money had some link to precious metal: gold or silver," Coggan, author of a new book, Paper Promises: Debt, Money and the New World Order, tells Morning Edition's Renee Montagne.
Coggan, who writes about finance for the Economist magazine, explains that before that time, the U.S. used gold to back the dollar; other countries could exchange their currency for American gold. But when President Nixon went off the gold standard, "essentially you had no limit on the amount of money that could be created and no limit on the amount of debt that could be created."
The result, he says: asset bubbles.
Sound familiar? It should. Here was the FutureOfCapitalism review of Thomas Friedman and Michael Mandelbaum's That Used To Be Us: How America Fell Behind in the World It Invented and How We Can Come Back:
The authors chastise President Nixon for his 1971 action breaking the link between the dollar and gold. Under the old system, they write approvingly, "the dollar was tied to the price of gold and international exchange rates were fixed, which imposed fiscal discipline on all participating countries, including the United States. The government couldn't print or spend money as much as its leaders wanted."
This thing about Nixon closing the gold window is a big, important idea that can't be stressed enough. It's not merely a fixation of Ron Paul. Mainstream, establishment journalists are coming around to understanding that it's a big deal.
The Bretton Woods system Nixon changed was itself imperfect, and it is not what most current proponents of a gold standard want to return to. So the monetary story is a longer one than just "Nixon wrecked everything." But getting broader agreement on that Nixon point would certainly help build momentum for defining what should come next.