I was ten years old in the summer of 1971 watching “Bonanza,” which was interrupted for an important announcement by President Richard Nixon. The gold standard, or what was left of it, was gone, the President said. No more would the dollar be defined by metal we had to dig out of the Earth and put into banks. From that point on we could just trust the people at the Federal Reserve to print money as needed. Little was said then, and now.
It was Sunday, August 15, 1971 that America got its first credit card. All Presidents inherit the problems created by the previous administrations and the cost of Lyndon Johnson’s Great Society and Vietnam War had caught up with us. The national debt always grew in days of war, and would then shrink in times of peace. Nixon changed that pattern and the issue didn’t come up in the 1972 election, and is mentioned little in the race of 2012.All of us want good times, and ironically it was Herbert Hoover who warned us in his memoirs that if the dollar was not convertible into Gold that we would lose control of our finances. “No country can squander itself to prosperity on the ruin of its taxpayers” Hoover said. Thomas Jefferson was more direct referring to paper money unsecured by gold or silver as “Trash.”
In 1974 Congress took notice and established the Congressional Budget Office, and passed numerous acts from Gramm-Rudman in 1985 to the Budget Control Act of 2011. But the debt still piles on.
While there may be a shortage of gold, let’s hope our Asian creditors don’t catch on that the supply of green paper is endless.
John O’Hara is an attorney. He lives in Brooklyn.