Visions of an economic apocalypse can be very effective political tools, even if the apocalypse never occurs, as William Jennings Bryan and LBJ both knew. Similarly, it does not seem much of an exaggeration to say that arguments for the gold standard today have more value as political expression than they do as an actual political program. After all, if Reagan and Greenspan couldn’t or didn’t want to accomplish a return to a gold standard at a time when interest rates, inflation, and unemployment rates were at crisis levels, it is next to impossible to imagine another president, Congress, and Federal Reserve pulling the task off, especially because official inflation in the United States since the late 1980s has not been the massive problem it was during the Nixon-Ford-Carter years. As a consequence, the question of returning to a gold standard has taken on the characteristics of marginalized populism; it’s attractive for some voters to hear, but almost no person in political power actually wants to bring it about. Indeed, gold populists may get more leverage from the idea of a gold standard than from its actually occurring. (A comparable idea on the other side of today’s political spectrum might be abortion rights; if abortions were readily obtainable throughout the country, the Left and the Democratic Party would lose one of the most effective organizing and fundraising tools in their arsenal.) In this regard, today’s gold populists are not so different from the silverites of the William Jennings Bryan era (except for the chosen metal). Bryan’s economic ideas, too, were generally dismissed by orthodox economists and financiers, but to use today’s parlance, they certainly “stirred up the base.”
It remains an open question as to how powerful a political force today’s gold populism is—in part because the political agenda is vague or unattainable, and in part because the ultimate size of the movement is hard to gauge. Listening to today’s gold populists, it can be difficult to distinguish between the sales pitch for buying gold and the arguments for gold-backed currency; it seems likely that some of that confusion is a deliberate blurring of passions, and that a portion of the public does indeed want both. Yet a gold-backed currency may not be in gold owners’ best interest. Roughly speaking, the use of gold as a monetary instrument runs at odds with its use as a personal investment. That is, if the dollar were fixed to a defined amount of gold, then the dollar value of gold would not appreciate in an amount that makes gold an attractive investment to holders of dollars. (It would also not depreciate very much, but during normal economic times most investors seek a return beyond mere value protection.)
Somewhat surprisingly, there are few reliable statistics on how many Americans own gold as an investment (presumably in coin or bullion form). Certainly a notable proportion of the country believes that gold makes a good investment. As noted in the introduction, significant percentages of Americans have told pollsters that they consider gold to be the best, or among the best, long-term investments. This is a very different question than how many Americans actually own gold. At various points in America’s history, that question has either been close to irrelevant (because, for example, in the nineteenth century the vast majority of Americans could not afford to invest in any assets beyond those that kept them alive) or a non sequitur (because, for example, from 1933 to 1975 it was not legal for Americans to own gold as an investment). Even today, although gold ownership is reasonably common, one is forced to estimate. In 2015, the US Mint sold about $1.2 billion worth of American Eagle and American Buffalo gold coins.21 That represents a fresh supply every year of hundreds of thousands of gold coins, and many Americans also purchase gold bullion and gold coins from other countries. Market vagaries, however, make it difficult to extrapolate from that figure how many Americans are buying: some individuals may purchase large quantities of coins, and there is no easy way to track secondary coin markets, the number of non-Americans buying gold in the United States, etc.
The World Gold Council, which gathers and disseminates mountains of statistics about gold, says it can provide no estimate for the number of Americans who own gold as an investment.22 Metals Focus, a London-based precious-metals consultant, says that it has no figures it can release, but allows that it has “seen market research” that confirms an estimate I provided that fewer than 10 percent of American adults own gold as an investment.23 A detailed 2010 poll designed to elicit the views of Americans sympathetic to the Tea Party found that 5 percent of those who viewed the Tea Party favorably said that they had purchased gold coins or bars in the preceding twelve months (unfortunately, the poll did not report a result for the same question from the general population).24 Many of the newsletters and consultants that advise people to buy precious metals use a figure of between 1 and 3 percent of the American population owning precious metals.
These estimates mean that somewhere between 2.5 and 25 million Americans own gold as an investment. That range is wide enough to make any concrete analysis difficult, though it seems fair to say that at no point in American history have more Americans owned gold as an investment than they do in the twenty-first century. Even at the smaller end of that range, the gold constituency in America is large enough to be a political force of some size, despite the enormous obstacles in reestablishing a link between gold and the dollar.
Populism, after all, is neither defeated by obstacles nor undone by paradox. Populism is a mobile fixation, propelled forward by a promise to restore the past, no matter how unattainable or indeed fictional that past may be. Those who advocate returning national currency to a gold standard have massive hurdles in front of them, but they have certainly not given up. They have moved their battles to other arenas where they might have a better chance of victory—such as technological innovation and local government.
One of the most dramatic monetary developments of the twenty-first century has been the rise in the use of digital currencies, and the innovative infrastructures that support them. On the one hand, Bitcoin and other forms of digital currency represent the opposite of a gold-based money standard: not only does the Bitcoin contain no intrinsic value, it doesn’t even physically exist. On the other hand, Bitcoin attracts some of the same people who are interested in a gold standard because it is not dependent on government or a central bank. Both systems derive value from relative scarcity; the total number of bitcoins that can be “mined” is preset at 21 million, and while the amount of gold is more open-ended, the metal is scarce and new supply can only be produced by mining and refining; typically the world increases its gold supply by 1–3 percent a year. Moreover, the “blockchain”—a kind of widely accessible digital ledger of transactions—that enables Bitcoin provides what some have argued is a promising method for tracking digital transactions backed by gold.25 One putative advantage of such a system is that it relies merely on consensus; as long as gold can be legally obtained and owned, there are no obvious laws against such a system.
Of course, those Americans who believe that gold confiscation is a possible threat would have little trouble imagining government interference with a private, gold-backed currency. As some of these twenty-first-century argonauts have discovered, monetary systems that are created outside of governmental authority are almost automatically magnets for illegal behavior, regardless of what their investors may have intended. As far back as 1996, a prominent Florida-based company called E-gold began offering a digital currency backed by $20 million in physical gold; by 2002 the company had amassed a customer base of over 1 million people in one hundred countries.26 However, the company found itself on the wrong side of a regulatory redefinition and was charged in 2008 with illegal money transferring. Its assets were seized and its cofounder was placed under six-month house arrest.
Others have tried to bring the battle over metal-backed money to the state level, where populist voices often get a more favorable hearing. In March 2011, Utah became the first state to pass a law altering its definition of “legal tender” to include silver and gold. The law recognized silver and gold coins issued by the federal government as legal tender, and removed certain state ta
xes from their transfer. The bill was laden with the symbolism of mining days old and new. It was drafted by Larry Hilton, chairman of the Utah Precious Metals Association and also a Tea Party activist; when the governor signed it into law, a local real estate financier named Wayne Palmer handed a set of commemorative gold and silver coins to the state as a gift. Here, too, the line between populist energy and illegal activity is not always clearly drawn; less than a year later, the SEC charged Palmer with running a Ponzi scheme that defrauded investors of tens of millions of dollars.27
Aside from some limited tax benefits for individuals, the impact in Utah has been minimal. A gold coin issued by the US Mint might have a metallic value of over a thousand dollars, but it could only be spent at its face value of, say, $50. The law thus makes it legal to spend gold in ways that no one would. One Utah insider said: “If somebody is stupid enough that they want to buy a Snickers bar at 7-Eleven with a gold coin worth thousands of dollars, they will be able to do that.”
Nonetheless, “sound money” legislation has become a popular trend in state government in recent years. Legislators in Missouri and South Carolina introduced sound money bills in 2012, though neither one actually became law. In 2013, the governors of Louisiana and Texas within a week of each other signed nearly identical bills to exempt gold and silver coin and bullion transactions from state sales taxes. Similar legislation was introduced in Arizona, Colorado, Tennessee, and several other states.
The spate of bills was not accidental. The American Legislative Exchange Council (ALEC) is a network of conservative state legislators that drafts and distributes model legislation on a wide variety of issues. ALEC and other groups attempted to replicate the Utah law in more than a dozen states; one group even drafted a “constitutional tender” bill template and encouraged gold-standard fans to send it to friendly legislators.
The motives and rationales behind such efforts are as mixed as their success. At a minimum, they want to call attention to weaknesses in the Federal Reserve system of paper money. The freshman Republican legislator in Utah who introduced that state’s bill did not support a return to a gold standard, however. And to governors, some of the bills looked politically attractive because conservative voters presumably would like to hear that taxes were eliminated on anything, especially precious-metal transactions. (After gold-and-silver bills became law in Louisiana and Texas, both states’ governors went on to run for president in 2016, although neither one made it to the actual primary voting stage.) Even here, though, success was not uniform. Arizona’s conservative governor Jan Brewer vetoed a Utah-like bill in 2013, calling it “vague” and citing uncertainty over its tax implications.
By 2013, the price of gold had already begun to fall, and with it, seemingly, the momentum for this type of state legislation. But the passion for gold continued in other forms. In 2015, Texas passed a law authorizing it to build the nation’s only state-run gold bullion depository. The idea is that any resident or business in Texas, or any precious-metal investor in the world, could open an account to store gold in the depository. Then, at least according to some visions for the project, they could be issued checks or credit cards that draw on the bullion. The state representative who introduced the bill said: “I would like to see this all come together so we become a commodities hub for the continent.”28
Texas may or may not succeed in becoming a continental gold hub. The point is that the fullness of America’s relationship with gold far transcends the question of restoring gold money, nationally or locally. We cannot get enough of the metal; after India and China, two countries with populations of over a billion people, the United States is the largest consumer of gold in the world. Consider that for forty years in the twentieth century through the 1970s, the United States Treasury minted no gold coins at all. Today, the US Mint is the largest producer of gold and silver bullion coins in the world. In 2015, Treasury reported that demand was so high that the mint at West Point was operating in three shifts a day, seven days a week, and paying workers overtime to make American Eagle coins. After a slump during the Great Recession, American sales of gold jewelry rose for several quarters in a row. The United States is the fourth-largest gold producer in the world, having surpassed longtime rival South Africa; while down somewhat from a peak in the late 1990s, the 210 metric tons produced in 2014 represents a higher level than for nearly all of American history.
Of course, there are downsides to this gold fixation. The most pressing problem the American gold-mining industry faces in the twenty-first century is not, strictly speaking, financial—it is environmental. The open-pit cyanide-leaching techniques that helped restore the industry beginning in the 1980s are remarkably productive but require tremendous effort and hazard. In the average open-pit mine, operators must unearth three tons of ore to produce enough ore for a single wedding band. The rest of the ore becomes a mound of chemically toxic waste.29
And, as with other areas of American society, there are moments when gold fever spills over into potentially violent conflict. In 2015, owners of a Montana gold mine who were being cited by a federal agency arranged for an armed local militia to stand guard and prohibit access to the mine and surrounding public lands. It did not lead to actual armed confrontation, but served as a reminder that “God, Guns, and Gold” is a potentially combustible formula in a country as armed as America.
What is striking about these gold debates, sales pitches, fraudulent schemes, eruptions, and political posturing is that they endure almost as much as the metal itself. Consider how distant so much of our country’s political and economic history feels from today’s world. The overwhelming majority of Americans are not today publicly wondering whether banks should exist, as was the case in the Andrew Jackson era, or whether silver should be freely coined and legal tender, as in the age of Bryan. Getting rid of paper currency—a serious political stance in the middle of the nineteenth century—would have few more serious proponents in a truly open national debate than would a flat earth. The International Monetary Fund and World Bank have vociferous critics on all sides of the political spectrum, but you won’t find an audience to watch presidential debates about them, and no serious American politician today offers a vision of a global economy that lacks such institutions—they are a widely accepted feature of the financial landscape.
Yet two hundred years after the discovery of gold within the United States, we are still fighting about it. If anything, gold has become a more widespread political and economic force today than during much of the last century. For millions, gold is the repository of hope in something eternal, a protector of liberty, combined with a promise of wealth. It is an unquestioned safe haven and a connection to a past that is deeply American and beyond American. To millions of others, it is a hopeless artifact, a damaging delusion, an environmental blight. The arguments and rhetoric may be inverted, borrowed, riddled with misleading claims or made in bad faith—but they are strikingly similar to those made by our grandparents and great grandparents. Even as we disagree on positions, the metal keeps finding ways to assert itself into our political imagination. Americans are united, as we are divided, by our passions about gold.
ACKNOWLEDGMENTS
A book of this scope requires considerable collaboration, both direct and indirect. My most frequent content collaborators have been the librarians and archivists who guided me through mountains of ore to find the golden nuggets. Many, including those at the New York Public Library and Columbia University Library, have done so anonymously. But especially helpful were Jennifer Cuddeback and Alexis Percle at the LBJ Library, Diane Shaw at Lafayette College, Valoise Armstrong at the Eisenhower Library, and Andrea Faling at the Nebraska Historical Society.
Over the course of four years I deployed a small army of researchers—including Zoe Carpenter, Douglas Grant, Sarah Miller, Bartie Scott, Christian Wallace, and Mauro Whiteman—whose contributions to this book have been indispensable.
Many friends and allies generously reviewed and c
ommented on portions of the manuscript prior to publication. My thanks for this aid go to Liza Featherstone, Martin Hipsky, Michael Kazin, Richard Panek, Anya Schiffrin, Jack Shafer, Paul Smalera, Joseph Stiglitz, Bernhard Warner, and Julian Zelizer.
Writing a book while holding a full-time job is greatly aided by supportive bosses. I am fortunate to have had two—Chrystia Freeland at Reuters and Eric Schurenberg at Inc.—while working on this project.
The team at Liveright and Norton has been spectacular throughout. Robert Weil is an outstanding, erudite editor whose style and insights are reflected on every page. Marie Pantojan patiently helped me through the editing process; Gary Von Euer and Don Rifkin provided a careful and insightful copyedit; and Steve Attardo gave the book its handsome look. My agent, the intrepid Chris Calhoun, championed the project when it was purely theoretical and pushed me to write a compelling proposal.
My deepest thanks go to my family—Erinn and Henry. This book took many weekend afternoons in the library and quite a few nights away on research trips. I am exceedingly grateful for their patience and support.
NOTES
Abbreviations
DDEL Dwight David Eisenhower Library, Abilene, Kansas
FDRL Franklin Delano Roosevelt Library, Hyde Park, New York
FRUS Foreign Relations of the United States
GFL Gerald Ford Library, Ann Arbor, Michigan
LC Library of Congress, Washington, DC
LBJL Lyndon Baines Johnson Library, Austin, Texas
NARA National Archives and Record Administration, College Park, Maryland
Introduction
1. James K. Polk: “Fourth Annual Message,” December 5, 1848, Gerhard Peters and John T. Woolley, The American Presidency Project, http://www.presidency.ucsb.edu/ws/?pid=29489.
One Nation Under Gold Page 35
