The New York Sun launches, with Judy Shelton’s op-ed this evening, a series on the 50th anniversary of the collapse of the monetary system that had been established at Bretton Woods at the end of World War II. That system, centered on America’s promise to redeem dollars presented to it by foreign governments at a 35th of an ounce of gold, was far from perfect. Yet its collapse, in the summer of 1971, opened up a new and far more dangerous moment — the era of fiat money.

We regard the drama of fiat money — that is, money without a definition in specie — as among the most newsworthy stories of our time. This is not a view widely shared among the bien-pensant economists and politicians. It turns out that inflation has a vast constituency of those who count as a virtue fiat money’s ability to enable the expansion of government and the funding of the socialist state. All the more compelling is the current crisis.

Our own introduction to this story began at a newspaper called the Berkshire Courier, in Great Barrington, Massachusetts, where we landed in the summer of 1965. One of our tasks was to operate the stapling machine in the job printing shop, where we bound the newsletter of one of the heroes of the struggle for honest money, Colonel E.C. Harwood of the American Institute for Economic Research. We became an avid reader.

The collapse of Bretton Woods itself came six years later, on August 15, 1971. That’s when President Nixon closed the so-called “gold window” of the Treasury at which foreign governments could redeem their aforementioned dollars at a 35th of an ounce of gold. That default, which became known as the “Nixon Shock,” was intended to be temporary. Soon, though, Congress removed from our laws any definition of a dollar.

Then, in 1978, an astonishing, but rarely remarked-upon, event took place. Congress ratified an amendment to the treaty that binds us to the International Monetary Fund. The change prohibited members from denominating their money in terms of gold. Countries seeking a standard could define their money in any terms — moon rocks, say, or pixels — save for the element whose quantity has remained constant since creation.

One feature of this story is that disagreement — though often overshadowed — has simmered throughout. In 1981, at the behest of Senator Jesse Helms and President Reagan, Congress finally created the United States Gold Commission. It ended up endorsing fiat money. Yet its crowning achievement was a dissent by two of its members, businessman-scholar Lewis Lehrman and Congressman Ron Paul.

We regard the Lehrman-Paul dissent — “The Case for Gold” — as one of the great American documents. Its authors rank among this long debate’s heroic figures, though there are many. They have inspired a rising generation of journalists, economists, and politicians who are starting to grasp that their turn will come to deal with the trillions of dollars in spending and debt being racked up by our president and Congress.

We will try to include in the weeks ahead some of these voices who have helped our efforts to think through this problem. This morning the Wall Street Journal has a devastating editorial on how the Fed can’t predict the inflation of its own money. Grant’s Interest Rate Observer, meantime, is pointing out that when Nixon closed the gold window, inflation was running at an annual rate of 4.3%.

That is more than a full point lower than the annual rate at which inflation was running just last month. The Fed insists that won’t last, but its friends are plumping for higher inflation yet. We look less to the Fed than the Congress, to which 100% of the monetary powers enumerated in the Constitution are granted. And remember that the fiftieth is the year in which we are enjoined to return to every man his possession.

________

Image: Detail of a photograph, by rickpilot_2000, of The Mount Washington Hotel, Bretton Woods, New Hampshire. Via Wikipedia.