GUY RAZ, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Guy Raz.

Have you noticed, especially this past week, a lot of talk about...

(Soundbite of TV ad)

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Mr. ROBERT ZOELLICK (President, World Bank): What the price of gold has been telling people is that there is a lack of confidence in some of the fundamental growth policies.

(Soundbite of TV ad)

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RAZ: And this week, Bob Zoellick, the head of the World Bank - we just played a clip from him in that montage - Bob Zoellick pretty much shocked every mainstream economist when he said that the price of gold should be taken into consideration when setting monetary policy.

Now, to be fair, Zoellick wasn't saying, let's return to the gold standard. But the comments were interpreted that way and they made him, temporarily, a hero among a small but pretty vocal group that believes we should get back on the gold standard. And that takes us to our cover story today.

In a moment, a former Reagan adviser on how we'd go back to the gold standard. And later, a leading economist and former Treasury Department official on why, in a word, it's nuts.

But first, how we got off of it in the first place.

Mr. JAMES BUTKIEWICZ (Economic Historian, University of Delaware): By the late '60s, it seems as though we had almost an annual international financial crisis.

RAZ: That's James Butkiewicz. He's an economic historian at the University of Delaware. And he explains that at the time, the global economy was becoming too volatile - wild inflations some years; hyper deflation, others - and it wasn't predictable.

And so by the late 1960s, there were too many dollars being held and reserved by countries around the world. And the value was dropping. So those countries started to exchange their dollars for U.S. gold. And that was a problem.

Mr. BUTKIEWICZ: As our reserves kept dwindling, at some point we had to stop converting the dollar into gold. We weren't going to let our gold stock go to zero. It had already been slashed by roughly 40 percent of the value we had at the end of World War II, so we just didn't want to see it shrink any further.

So people who understood the system, understood the consequences, knew that it had to come to an end.

RAZ: And those people recommended that President Richard Nixon abandon the gold standard.

Mr. BUTKIEWICZ: Nixon and Haldeman were concerned that he would be known as the president that had to leave the gold standard. And he felt that it would be interpreted as a sign of failure on his part.

RAZ: Nixon was torn. So on Friday, August 13, 1971, he headed to Camp David for the weekend to mull over the recommendation from his Treasury secretary, John Connally.

Mr. BUTKIEWICZ: And then on Sunday evening, August 15th, President Nixon appears on television, announces to the world his new economic policy.

(Soundbite of archived footage)

President RICHARD NIXON: I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability, and in the best interest of the United States.

RAZ: And that was it. The U.S. went off the gold standard with Richard Nixon's signature. There was no legislation, no major discussion. And it sent shock waves around the world, but it was well-received by the American public.

Mr. BUTKIEWICZ: John Connally called him up after his speech and said, this is the economic equivalent of your trip to China.

RAZ: That's University of Delaware professor James Butkiewicz on how we came off the gold standard.

Now, Jeff Bell has been lobbying for a return of the gold standard for the past 30 years. He works for the conservative group the American Principles Project. He's the head of its gold standard campaign, and he's trying to convince potential Republican presidential candidates to support the idea.

Now, back in 1980, Bell was an adviser on Ronald Reagan's presidential campaign.

Mr. JEFFREY BELL (Policy Director, American Principles Project): He was always interested in returning to the gold standard, and I knew that because I was asked to come in and do new television commercials for him after he lost Iowa and before New Hampshire. Those commercials were all later used, except for the one on gold.

RAZ: So you're saying in 1980, when Reagan was running for president, he cut an ad that said, let's return to the gold standard?

Mr. BELL: Right. We cut the ad. But then later, after he had left the studio and returned to his home, he called me and said, that one ad, you know, the one about gold, can we kind of put that off to one side, because Milton Friedman and some of our friends here wouldn't like that, I don't think, if it came out.

RAZ: I want to ask you about some of the critiques of a return to the gold standard. But let me first ask you: Why do you think this is the answer to our economic crisis now, returning to the gold standard?

Mr. BELL: Reason number one is, we've tried everything else. We've tried a modified gold exchange standard, which was Bretton Woods; we've tried a pure paper standard; we've tried human management of the money supply. And we've run out of answers.

Right now, I think this paper money system is too much based on debt to be able to last much longer. The other countries that have the dollar as their main reserve currency are screaming bloody murder. So the key thing is that gold should be the final money of the world. It should be what people keep as reserves, the way it was in the hundred years until 1914.

RAZ: But here's what I don't understand. I mean, how would it work? There isn't enough gold in the world to match the amount of dollars in reserve in the world. I mean, there's something like $66 trillion in reserves in central banks, and something - about $6 to $10 trillion in gold reserves. So how would you make that system work?

Mr. BELL: Well, you would have a different value of the dollar, in terms of gold. There's no reason why you would have to return to $35 an ounce or even $400 an ounce. Gold is retained. In other words, it's seldom lost and its production increases overall supply by about 1.5 percent a year. So almost providentially, it's the best thing that could be a hard money base for any monetary system.

RAZ: How would you get politicians to agree to do this? The president couldn't simply say, let's get back on to the gold standard - like Nixon said, when he said let's get off of it. That just can't happen today.

Mr. BELL: Well, I think that although you're right, you'd have to have legislation. And you'd have to have some treaty changes because gold was excluded by an international agreement in, I believe, 1976.

But I think that it is an executive branch issue. In other words, if somebody like Reagan ran and was elected running on the gold standard, then that would be the mandate that Congress would need to pass the kind of gold standard that that president wanted.

RAZ: Jeff Bell, why do you think so few mainstream economists agree with you? And in fact, a lot of them think this idea is kind of crazy.

Mr. BELL: Right. I would say that the economics profession, which is an elite, is the last on its block to want fundamental change. If you go back and look at the history - which I know you have - of 1971, when Nixon pulled us off Bretton Woods, the monetary officials and the academics were for keeping convertibility to gold because they're always for what the status quo is. When you need to change the status quo, it'll almost always be a populist movement. It'll be something like the Tea Party, I think.

RAZ: I understand that you've been trying to convince potential Republican presidential candidates, 2012 candidates to push for the gold standard. Any luck so far?

Mr. BELL: Not yet. I've got a meeting with a possible presidential candidate next week - and I rather not say who he is, because it's a confidential meeting.

RAZ: So it's not Sarah Palin because it's a he.

(Soundbite of laughter)

Mr. BELL: You got me. You did get me on that.

RAZ: That's Republican strategist Jeffrey Bell. He is the political director of the American Principles Project, where he campaigned for the Gold Standard 2012 Project. Jeff Bell, thank you so much.

Mr. BELL: It's been a pleasure, Guy.

RAZ: Now, even though the U.S. has been off the gold standard for decades, our government still holds about 9,000 tons in reserves. It just sits there, collects no interest or dividends.

Ted Truman, like most economists, believes that a return to the gold standard is a bad idea. As a matter of fact, he thinks with the price of gold near $1,400 an ounce, we should open up the vaults and sell it all.

Mr. TED TRUMAN (Senior Fellow, Peterson Institute for International Economics): Well, if can sell it all at that price, we'd make approximately $350 billion.

RAZ: Three-fifty billion - which is a lot of money. But let's face it, I mean, our budget deficit this past year was $1.3 trillion. It would help.

Mr. TRUMAN: Well, and there would be a continuing saving because you not only pay down your debt, but we would save the interest on that debt.

RAZ: Okay. So this is actually starting to sound like a pretty good idea. How would you do this? Who would make the decision?

Mr. TRUMAN: The secretary of the Treasury technically has the authority to do this. We would plan the auction, a substantial amount over a period of, say, a decade.

RAZ: Well, I mean, if we sold all of that gold - right - wouldn't it collapse the global gold market?

Mr. TRUMAN: Well, I'm not so sure. Over the last decade, you have had about 92 million ounces sold, and the gold prices quintupled. So I'm not sure I would bet my mortgage on whether we should get $1,400 an ounce on average. But we should probably be able to sell it gradually without much adverse effect.

RAZ: As you know, there are some serious economists out there who say the U.S. government should go back to the gold standard. I look at the global economy -you know, rich countries are borrowing heavily, the Fed has just pumped - what -$600 billion into the economy, which is likely to drive the value of the dollar down. I mean, why should anyone have any faith in paper currencies? Why not go back to the gold standard?

Mr. TRUMAN: It would mean that you would have to have completely flexible wages and prices. We'd have to get everybody else to agree to it. And the truth of the matter is, the gold standard never really worked. People didn't obey the gold standard rules. The gold standard rule says as you acquire gold, you inflate. And as you lose gold, you deflate - meaning you drive prices down.

RAZ: Mm-hmm.

Mr. TRUMAN: So the gold price has gone up by $300 an ounce since the end of 2009. That would mean, actually, that rather than lowering interest rates today, we would have to raise interest rates.

RAZ: Ted Truman, a lot of - sort of mainstream economists, like you, they don't seem to only dismiss this idea of the gold standard, but they seem to get angry about the fact that it's even being debated, you know, that it's an affront to common sense. Why do you think that is?

Mr. TRUMAN: Well, I didn't use those words, but I think it probably actually is an affront to common sense. Why would you want to actually have a system in which you pay people to dig things out of the ground and then bury them in the ground again? And if that makes sense, that's fine. But it doesn't - it violates my sense of common sense.

RAZ: That's Ted Truman. He's an economist and a senior fellow at the Peterson Institute for International Economics. Ted Truman, thank you so much.

Mr. TRUMAN: You're welcome.

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