The Dollar's Long Day
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I · A Republic's First Coin (1791–1860)
[01] Money tells a story; the dollar tells one of the longest. [02] The year is 1792, and a young republic stamps out its first silver dollar at the Philadelphia mint. [03] On April 2 of that year, Alexander Hamilton signed the Coinage Act into law. [04] While Hamilton was building a national bank, Thomas Jefferson was drafting the very arguments meant to one day destroy it. [05] By 1811, Spanish reales had circulated through the thirteen colonies for nearly a century. [06] For two decades, the Jeffersonians had been warning their countrymen against centralized finance. [07] American farmers used to carry tobacco notes, Spanish coin, and even gold dust as everyday money. [08] On Saturday mornings, a country shopkeeper would shave a thin sliver off any silver dollar he did not trust. [09] The dollar that Hamilton designed weighed exactly 416 grains, of which 371.25 grains were pure silver. [10] Andrew Jackson, who distrusted bankers as deeply as he distrusted aristocrats, vetoed the Second Bank's charter in 1832. [11] Had Jackson trusted central banking, the Panic of 1837 might never have torn the frontier apart. [12] It was the Civil War, more than any economic doctrine, that finally drove Washington to print paper money on a national scale.
II · Greenback, Gold, and the Federal Reserve (1862–1929)
[13] The greenback was issued in 1862 to finance a war the Treasury could no longer pay for in coin. [14] What restored monetary order after Reconstruction was the Resumption Act of 1875. [15] Returning to the gold standard seemed prudent to Eastern bankers and ruinous to Western farmers. [16] By insisting on free silver, William Jennings Bryan rallied a generation of debt-stricken farmers behind him. [17] In 1896, Bryan declared that mankind must not be crucified upon a cross of gold. [18] Although Bryan lost the election, his oratory still echoes through American memory. [19] Out of the Panic of 1907 came the conviction that the country needed a permanent central bank. [20] Today, every American banknote is printed by the Bureau of Engraving and Printing under Federal Reserve authority. [21] When the First World War broke out, European gold flowed into American vaults at an unprecedented rate. [22] The war made the dollar emerge, almost overnight, as a credible reserve currency. [23] Both Britain and France borrowed heavily from New York bankers, and the balance of monetary power began to shift across the Atlantic. [24] After the armistice, the French government insisted that gold be redistributed to restore the prewar parities. [25] The 1920s economy grew so confidently that few Americans imagined any cliff ahead. [26] The collapse of October 1929 was such a shock that an entire generation lost faith in finance. [27] Nor did the country recover quickly: another decade of stagnation lay ahead.
III · Roosevelt and the Gold Standard's End (1933–1944)
[28] On April 5, 1933, every gold coin in private hands got recalled to the Treasury. [29] Within weeks, Roosevelt had the confiscated metal reminted into bullion bars and shipped to Fort Knox. [30] Never before had a peacetime president dared to redraw the price of gold by decree. [31] Banks were closed for four days, in order that public confidence might begin to recover. [32] If the Great Depression had lasted only briefly, the dollar today would still hang from a chain of gold. [33] Roosevelt argued, again and again, that no civilized nation should ever again allow gold to dictate the limits of human ambition. [34] The Bretton Woods system, designed by Keynes and Harry Dexter White, fixed the world's currencies around a dollar pegged to gold at thirty-five dollars an ounce. [35] Keynes found it impossible to persuade the Americans of his bancor proposal. [36] Whether Bretton Woods could survive a quarter-century was a question its architects scarcely asked. [37] The new system rested upon a single condition: that no one ask for gold.
IV · From Bretton Woods to Nixon (1944–1971)
[38] For two decades, the system worked smoothly, as if gold and the dollar were a single currency. [39] Only when France began demanding bullion for its dollars did the cracks become visible. [40] By the late 1960s, more than half of America's postwar gold had been spent abroad. [41] On August 15, 1971, Richard Nixon announced what would later be called the Nixon Shock. [42] The dollar has floated freely ever since. [43] After 1971, a single sentence from a central banker could move trillions of dollars overnight. [44] Inflation, slumbering since the 1950s, awoke in the 1970s with sudden ferocity. [45] Year after year, prices rose faster than wages, and the average American learned to mistrust his own paycheck. [46] Either confidence had to return, or the dollar itself would dissolve. [47] For a moment, it seemed that the dollar might dissolve along with the country's patience.
V · Volcker, Plaza, Greenspan, Lehman (1979–2008)
[48] In 1979, Volcker raised the federal funds rate to a level no banker dared imagine. [49] Borrowers wept and farmers went bankrupt, yet bond traders cheered. [50] By the mid-1980s, inflation has been beaten back, and the long bull market in U.S. assets has begun in earnest. [51] The Plaza Accord of 1985 was not only an attempt to weaken the dollar, but also a quiet admission that even superpowers must compromise. [52] If the dollar were to weaken further, American manufacturing might at last find its footing. [53] By 1995, foreign central banks held trillions of dollars in reserve — the largest store of foreign exchange the world had ever known. [54] They held those dollars not because they loved Washington, but because they had nowhere else to park their savings. [55] The dollar in those years was three things at once: the currency of America, the language of global trade, and the silent partner in every contract. [56] Indeed, Alan Greenspan presided over a period now called the Great Moderation, when markets seemed to demand only the gentlest of nudges. [57] If regulators had looked closer, the storm of 2008 could have been seen long before it broke. [58] They did not look — and the warnings, which Cassandra after Cassandra did sound, went unheeded. [59] There came a Sunday in September 2008 when Wall Street's old order finally cracked. [60] Lehman Brothers must be remembered as the night the old order cracked. [61] Without the Federal Reserve's emergency intervention, every major bank could have collapsed within a fortnight. [62] Central banks declared, with rare unanimity, that the world shall not face another Lehman.
VI · Bitcoin, Digital Money, and the Future (2008–onward)
[63] Within a decade, a new species of money will be challenging the dollar's monopoly on global reserves. [64] Bitcoin, a currency needing neither a government to issue it nor a central bank to control it, was launched on January 3, 2009. [65] The dollar will outlive the men who fear for its life. [66] Some economists insist that, sooner or later, every government is going to issue a digital version of its own currency. [67] By 2030, every major central bank will have launched, or at least tested, its own central-bank digital currency. [68] By the time you finish reading this article, the world will have been generating new dollars, new debts, and new questions every second. [69] If the dollar ever does lose its reserve status, every commodity, every loan, and every contract on earth will be rewritten. [70] Money issued by an algorithm rather than a parliament is something the world has never quite known before. [71] Provided that trust survives, the dollar will continue to underwrite the architecture of global finance. [72] To predict the dollar's future is, in the end, to predict the future of the United States itself. [73] Most of us have learned to trust the dollar without thinking about why. [74] Many a saver in 2008 might have wished that he had bought gold at the start of the decade. [75] Will the dollar last another century? — that, no honest economist can answer with certainty. [76] The dollar, dear reader, is more than money: it is a record, a promise, and a memory. [77] How fragile, and yet how durable, this single piece of paper turns out to be! [78] And money tells a story, doesn't it? [79] Ah — and money, century after century, keeps telling the human story. [80] Be it noted, then: the dollar's long day, like this sentence, has only just begun.
VII · Coda · The Dollar in 2030+ (补五句 · 81–85)
[81] Trust restored, the dollar quietly resumed its authority over global trade. [82] Whoever holds dollars in the years ahead had better watch the politics that back them. [83] Most savers, even today, would rather keep dollars than hold gold for a generation. [84] It's high time the world admitted that no single currency can carry the global economy alone. [85] Today, the dollar is traded almost three times as often as the euro and the yen combined.