Book Review: One Nation Under Gold

One Nation Under Gold is a book about the role of gold in American economic history by James Ledbetter. The book details how gold has shaped the American psyche and played a role in many debates and power struggles from the founding of the United States until the current age.

At the beginning of the book, there is a helpful timeline of many of the most important events that Ledbetter discusses. A short preface states the case to be made: that monetary gold has many qualities that good money should have, but cannot fulfill the ultimate hopes of its advocates. The introduction begins with both positive and negative contemporary commentary on the California Gold Rush, then briefly discusses the history of gold and the human relationship to it in the New World, particularly the United States.

The first chapter begins with George Washington’s woes with paper money during the American Revolution. Ledbetter uses this example to show how the Founding Fathers came to hate paper money. The role of debt in encouraging states to ratify the Constitution is mentioned. The search for effective currency in the 18th and 19th centuries is discussed at length, which included foreign coins, gold, silver, and paper currencies theoretically (but sometimes fraudulently) backed by metals. The correlation between monetary views and one’s opinion concerning the size and scope of government (which continues to the present day) is noted, with centralized paper money being associated with big government and decentralized metallic money being associated with small government. After discussing Andrew Jackson’s battle to defeat central banking and the Panic of 1837, Ledbetter returns to the California Gold Rush and its implications, including environmental and human exploitation as well as the Panic of 1857. With the Civil War and the issuing of greenbacks to fund it, a great failure of the gold standard is demonstrated that will echo through the rest of the book: it would stop wars and expansive social programs if it were strictly adhered to, but political leaders will always find some workaround.

Chapter 2 covers the time from Reconstruction to the Gilded Age. Ledbetter begins with the market manipulations of Jay Gould and Jim Fisk, alongside President Ulysses Grant’s role in the affair. The differences in opinion between North and South over paper money and compensation for the Civil War are also highlighted. Ledbetter notes an important lesson from these years: a polity that values multiple currencies will create a market of exchange between them, and huge swings in those markets will eventually cause social unrest. The debate over the monetization of silver and its role in financial downturns for the rest of the 19th century are discussed next, but the decade of the 1880s is skipped over. The chapter concludes with the Panic of 1893 and the near-disappearance of US government gold reserves in 1895, which was resolved with the help of J.P. Morgan.

The third chapter deals with the agrarian populist response to these events as well as events up to the Great Depression. The role of William Jennings Bryan and other silver advocates occupies much of the first half, along with their defeat as a result of gold discoveries in Yukon Territory and South Africa. Ledbetter includes the popular but controversial interpretation of The Wizard of Oz (1900) as an allegory for 1890s politics. Next, the lack of monetary liquidity and an attempt to corner the copper market as Fisk and Gould tried to do with gold in 1869 are cited as causes for the Panic of 1907, which was used as a pretext to create the Federal Reserve System in 1913. With World War I and its financial aftermath, Ledbetter again shows that when forced to choose between adherence to sound money or engaging in warfare, politicians abandon the former. The only problem here is his blaming of the gold standard for causing the Great Depression.

The Roosevelt-Truman era is the subject of the next two chapters. Ledbetter details the steps that Roosevelt took to outlaw private gold ownership for Americans and transition to a managed currency, a clear step toward centralization. The ending of Chapter 4 details the coalition against FDR’s actions that persists in some form to the current era; paleoconservatives and some business interests opposed his moves for partisan reasons, pro-gold economists believed that decoupling money from metal would cause economic and political problems, and a fringe of conspiracy theorists and anti-Semites railed against pernicious minority power and influence.

The fifth chapter explores the legal fallout from Roosevelt’s policies, as well as the establishment of Fort Knox as a gold storage facility. The debate over gold clauses, by which creditors sought to hedge against inflation, is highlighted. The argument that devaluing money is a soft form of sovereign default made at this time is still advanced by sound money advocates. The Supreme Court’s ruling on gold clauses in Perry v. United States (1935) is shown to be coerced by the circumstances; any less convoluted ruling would have suffered a run-around by Congress and FDR. The role of gold in World War II is discussed somewhat briefly. The formation of the Bretton Woods system, a quasi-gold standard that lasted until the early 1970s, is covered in greater detail. Ledbetter concludes the chapter with the postwar populism that was in many ways the opposite of 1890s populism in terms of its views on gold and inflation.

Chapters 6–8 take the reader through the Bretton Woods era. This section begins with a description of the balance-of-payments problem, which steadily grew through the postwar era and eventually brought down the Bretton Woods system. That foreign creditors gained the ability to effect a bank run on US gold supplies became increasingly alarming through the 1950s. The crisis in the London gold market in 1960 is discussed next, followed by the closing of loopholes that let Americans own gold overseas. The extent to which Americans disobeyed the law to own gold is explored, including an amusing case of a golden rooster that publicly showcased the ridiculousness of such prohibitions.

The seventh chapter is an in-depth examination of Operation Goldfinger, a set of attempts by the US government to find more gold that would seem like jokes to a reader today. The role of the French government in threatening to destabilize the global monetary system is discussed here as well. Ledbetter mentions the possibilities of cutting spending by withdrawing US forces from Germany and Japan in the 1960s, but once more, gold went up against foreign policy and lost. Another important lesson from this chapter is that price controls, such as that of gold set at $35 per ounce despite rising demand, will always collapse eventually.

The eighth chapter picks up where the sixth chapter left off, with airlifts of gold from America to shore up the British pound. This is followed by the frustrations of the Johnson administration in dealing with Vietnam and gold balances. The end of Bretton Woods is foreshadowed with a 1968 speech from Sen. Jacob Javits (R–NY). Ledbetter explains the two-tiered gold market that was set up for the final few years of Bretton Woods. The final ten pages are devoted to critics of what was happening at the time (Murray Rothbard, Alan Greenspan, Neil McCaffrey, William F. Rickenbacker) as well as those who sought to profit from it (Harry Browne), but Ledbetter annoyingly uses the “goldbug” slur here and for the remainder of the book.

Chapter 9 deals with the birth of the current system of fiat currencies and the end of gold-backed government money. Yet again, Ledbetter shows that there were ideologues and pragmatists in government, and the latter won out. The rivalry between Fed chairman Arthur Burns and the rest of the Nixon administration takes center stage here. The relative aloofness of Nixon himself on monetary policy may surprise a reader unfamiliar with the history. The chapter concludes with the beginnings of the modern precious metals investment market, the legal aspect of which started with silver coins in the 1960s and later expanded into gold. The fraudulent activities of the Pacific Coast Coin Exchange are used as an example of the all-too-common unscrupulousness of precious metal investment companies.

The tenth and eleventh chapters explore the legalization of private ownership of gold in the US and the first years of the legal market. Ledbetter illustrates the backdoor methods by which gold ownership was partially and then fully legalized for Americans. As is typical of American politics, the most consequential legislative changes were ultimately passed as riders on other, more mundane bills. The beginnings of Fort Knox conspiracy theories is mentioned, then the role of the Krugerrand and its eventual banning to pressure South African apartheid is discussed. Chapter 11 begins with the 1970s debate over restoring gold clauses in contracts, which ultimately passed but had no real effect. The middle of the chapter covers the Gold Commission under Reagan, which led to the minting of American gold coins but little else of substance. The damaging environmental impact of new methods of gold extraction are briefly mentioned, then the chapter finishes with more scam gold companies in the International Gold Bullion Exchange and the Bullion Reserve of North America.

The final chapter begins with the Great Recession and the gold investment promotions immediately thereafter. Yet another fraudulent company, Goldline, gets a mention here. A connection is made between current-era gold advocacy and the seemingly insincere gold-standard rhetoric of the Republican Party in the Reagan years, as well as between the groups in coalition against FDR and his gold policies. Though Ledbetter is correct to point out the obstacles to restoring a gold standard and the empirical case that it would not do what its advocates claim it would, the supply objection is not as strong as he seems to believe. Even so, Ledbetter’s stated estimate of a gold price of $10,000 to $50,000 per ounce agrees with my own calculation of $12,616.75 per ounce as of 2015. He mentions E-gold and Bitcoin as technological advances that seek to emulate aspects of the gold standard, but demonstrates a lack of understanding of the latter. Ledbetter claims that no serious politician offers a vision of a world without global financial institutions, failing to realize that any serious movement of that type will be anti-political and/or revolutionary in nature.

Overall, Ledbetter’s history is mostly sound, though a bias against gold advocates that reaches beyond the evidence against them is persistent throughout. The book offers a strong challenge to the idea of a gold standard, not in theory, but in practice. The case is well-made that advocating for governments to institute sound money policies is what this publication would call politically autistic, but the potential of digital currencies to take over the global economy and bring back the good aspects of the gold standard while mitigating the drawbacks thereof is left undiscussed. Details about the monetary policies of the colonial period, the 1880s, the 1990s, and the early-mid 2000s are also noticeably missing. That said, the information that is present and the quality of bibliography makes this book well worth reading.

Rating: 4.5/5

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