It happened today - June 5, 2015

It has now been over 80 years since Franklin Delano Roosevelt took the United States off the gold standard on June 5, 1933. It may not be the most important thing ever to happen on that date; indeed it may be less important than Elvis Presley’s appearance on the Milton Berle Show, which seemed very controversial at the time, appears impossibly quaint and corny now, and was part of a dramatic cultural upheaval. But the erosion of “sound” money is certainly a significant, instructive and deplorable feature of the modern era.

I suppose FDR gets some credit for having warned people that he was keen on wacky policy improvisations. When he was running for his party’s nomination, in April 1932, he said “The country needs and, unless I mistake its temper, the country demands, bold, persistent experimentation. It is common sense to take a method and try it: if it fails, admit it and try another. But above all, try something. The millions who are in want will not stand by silently for ever while the things to satisfy their wants are within easy reach.”

Such talk goes down well. But it strikes me as boasting of one’s shallow incoherence. What business has a man seeking the presidency, or any high office, who has not in the course of his adult life arrived at settled and coherent notions of what principles govern public affairs and thus what policies are likely to succeed?

It’s also not obvious to me how he could know the things to satisfy their wants were within easy reach if he did not know what policies would bring them into their grasp nor indeed why, if they were so easily available, he failed by and large to provide them; the result of the New Deal or at least the situation after eight years of his experimentation was enduring depression right up to American entry into World War II.

I would argue that the incoherence, unsoundness and malleability of his policies was largely to blame. Including his early enthusiasm for monetary quackery. FDR initially endorsed stale crackpot inflationary policies pushed by the likes of Professor George Warren, even though he admitted to a White House fiscal policy conference that he did not know anything about economics.

The policy was arguably unconstitutional, forbidding private citizens from owning gold and taking property without compensation, which might have been trivial in itself but paved the way for an endless series of further restrictions on American freedom over the decades and indeed horrified many even in his own cabinet.

It also failed economically. And after musing about the way prices were behaving that “it was funny how sometimes they seemed to go against all the rules” none of which he knew anyway, FDR he flitted on to restricting output to raise prices, which failed economically and Constitutionally, and then to welfare and forced unionization followed by wartime Keynesianism. He died in 1945 before whatever might have been his next enthusiasm. The U.S. then tried to restore monetary stability by fiat and treaty in the 1944 Bretton Woods arrangements that lasted until massive social spending and loose monetary policy blew it apart in 1971. By then the genie was out of the bottle.

I confess that I can’t now see going back on gold. I get the arguments for the severe restraints a gold standard puts on government’s propensity to print money. But gold now seems arbitrary. Why not, I always want to ask, the molybdenum standard instead? But if FDR hadn’t done it, maybe we could still justify it on the grounds that it had always worked and we shouldn’t mess with success.

Instead FDR messed endlessly with failure, and left us a legacy of bold, persistent failed experimentation instead of principled adherence to the tried and true. Including when it comes to money.