Golden Rule

“GOLD is money, and nothing else.” So J. P. Morgan testified before the House of Representatives’ Pugo Committee (investigating the so-called money trusts) in 1913. A little more than forty years later, in 1945, Cambridge don John Maynard Keynes and U.S. Treasury official Harry Dexter White created a new world monetary system that was based on a steady dollar linked to gold at $35 per ounce, thereby ushering in a 25-year period of postwar Western prosperity. After Lyndon Johnson and Richard Nixon broke the Bretton Woods monetary discipline, leading to 15 years of stagflation, it was left to Ronald Reagan’s advocacy of a gold-price rule (and tax cuts) that provided Paul Volcker with the hard-money ground to stand on in order to restore price stability and rebuild the U.S. economy.

Nearly 125 years before J. P. Morgan uttered his dictum, at the very beginning of American economic history, Alexander Hamilton was able to outflank Jefferson and Madison in 1791 and persuade President George Washington to sign into law a bill to create a consolidated national debt that would trade freely on the open market, along with a national bank that would issue currency notes fully redeemable in gold specie. By 1794 United States bonds had the highest credit rating in Europe, according to John Steele Gordon’s recent book Hamilton’s Blessing. Of course, looking as far back as the historical eye can see, gold has always been endowed with a certain mysterious monetary property, even a religious connotation. In ancient times the priestkings had the first gold coins minted in temples, suggesting that the gods, not men, created money.

About the Author

Larry Kudlow

Larry Kudlow is the author of JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

Featured Tags

“GOLD is money, and nothing else.” So J. P. Morgan testified before the House of Representatives’ Pugo Committee (investigating the so-called money trusts) in 1913. A little more than forty years later, in 1945, Cambridge don John Maynard Keynes and U.S. Treasury official Harry Dexter White created a new world monetary system that was based on a steady dollar linked to gold at $35 per ounce, thereby ushering in a 25-year period of postwar Western prosperity. After Lyndon Johnson and Richard Nixon broke the Bretton Woods monetary discipline, leading to 15 years of stagflation, it was left to Ronald Reagan’s advocacy of a gold-price rule (and tax cuts) that provided Paul Volcker with the hard-money ground to stand on in order to restore price stability and rebuild the U.S. economy.

Nearly 125 years before J. P. Morgan uttered his dictum, at the very beginning of American economic history, Alexander Hamilton was able to outflank Jefferson and Madison in 1791 and persuade President George Washington to sign into law a bill to create a consolidated national debt that would trade freely on the open market, along with a national bank that would issue currency notes fully redeemable in gold specie. By 1794 United States bonds had the highest credit rating in Europe, according to John Steele Gordon’s recent book Hamilton’s Blessing. Of course, looking as far back as the historical eye can see, gold has always been endowed with a certain mysterious monetary property, even a religious connotation. In ancient times the priestkings had the first gold coins minted in temples, suggesting that the gods, not men, created money.