Forty Years Ago Today Nixon Took Us Off the Gold Standard

Today we celebrate, or, actually, mourn the 40th anniversary of President Richard Nixon’s taking America, and the world, off the gold standard, making many promises that were promptly broken. (For instance, President Nixon promised that the dollar would retain its full value. It only is worth about 19 cents today of what it was worth in 1971.)

There’s a little known twist. And as the late Radio Journalist Paul Harvey, master of the unexpected twist, would have said, “now you know the rest of the story.”

President Richard Nixon famously resigned the office of the presidency in the face of certain impeachment and removal from office. The charges were based in the infamous burglary of the offices of the chairman of the Democratic National Committee in the Watergate complex and, more specifically, of the ensuing alleged cover up.

America was transfixed for months by televised hearings presided over by the colorful Sen. Sam Ervin. We were treated to spectacles such as the discovery of The Tapes, the “Monday Night Massacre” resignation of the Attorney General and high Justice Department officials. We learned about the mysterious insider, pornographically code-named “Deep Throat” murmuring intriguing clues like “Follow the Money….”

It was a media circus.

But barely remembered, even by those of us who lived through that era, it also was a time of really serious, and in many ways unprecedented, inflation. And inflation causes a kind of societal uneasiness … uneasiness that easily can create a toxic political climate.

John Maynard Keynes, the famous economist, once wrote, in "The Economic Consequences of the Peace":

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Some presidents have such reservoirs of good popular will that, even if caught out, they can survive intact even impeachment by the House of Representatives. William Jefferson Clinton, notwithstanding certain misbehavior certainly unbecoming of his high office, was so esteemed for the prosperity his free trade, welfare reform policies had engendered that he was able to weather impeachment and achieve acquittal.

But not Nixon. Why might that be? It was almost as if he were hexed. Was he?

Thomas Paine was the visionary, and some might say prophet, who precipitated the American Revolution and in his continuing writings gave it inspiration, direction, and meaning: liberty, dignity and integrity. Paine is remembered for writing phrases such as "These are the times that try men's souls," and "Tyranny, like Hell, is not easily conquered."

Paine also wrote an almost unknown tract 1786 collected as "Dissertations on government, the affairs of the bank, and paper money." For example:

“Gold and silver are the emissions of nature: paper is the emission of art. The value of gold and silver is ascertained by the quantity which nature has made in the earth. We cannot make that quantity more or less than it is, and therefore the value being dependent upon the quantity, depends not on man. …

“Paper, considered as a material whereof to make money, has none of the requisite qualities in it. It is too plentiful, and too easily come at. It can be had anywhere, and for a trifle.
…
“Money, when considered as the fruit of many years' industry, as the reward of labor, sweat and toil, as the widow's dowry and children's portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency.”

Paine savagely indicted paper money.

“It was horrid to see, and hurtful to recollect, how loose the principles of justice were left, by means of the paper emissions during the war. The experience then had should be a warning to any assembly how they venture to open such a dangerous door again. ...

“But the evils of paper money have no end. Its uncertain and fluctuating value is continually awakening or creating new schemes of deceit. Every principle of justice is put to the rack, and the bond of society dissolved. The suppression, therefore, of paper money might very properly have been put into the act for preventing vice and immorality.”

Paine called for the strongest penalties for an official who might connive at going off the gold standard:

“As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom — and property no security — where this practice can be acted: and the committee who shall bring in a report for this purpose, or the member who moves for it, and he who seconds it merits impeachment, and sooner or later may expect it.”

“… [M]erits impeachment, and sooner or later may expect it,” wrote the prophet of the American Revolution.

And now you know the rest of the story. If only Richard Nixon had credited Paine’s prophecy and left the gold standard in place he might have finished out his second term and left office with his dignity intact.

Ralph Benko, an attorney and former junior Reagan White House official, is the senior advisor, economics to the American Principles Project’s Gold Standard 2012; editor of The Lehrman Institute’s definitive gold standard website; weekly contributor of “A Golden Age” to Forbes.com; proprietor of Facebook’s Gold Standard page, and is a Tea Party Patriot. He is the author of the award-winning cult classic on Web-based advocacy, The Websters' Dictionary.