Fifty years ago, come Monday, Britain left gold. Fifty years later we are caught in global stagflation, and one group in the United States, anyway, proposes returning to gold.It is a complicated problem, and I don't think I can solve it for you now. Pardon me if I just muse a bit about the world of gold 50 years ago. That quaint world where postage was two cents.
Very well, I drive over to the filling station and get out of the car, remove the front seat, put in my dip-stick and find I need 10 gallons of gas. The attendant fills it up and I give him $1.50. Then I screw on the cap, replace the seat over the tank, and drive off. Henry Ford discontinued Model Ts three years earlier (1928), after 15 million of them, and I would like to own a Model A. But who would buy new car in a depression? Besides, maybe I couldn't manage the new gear shift. Anyway, Southard drives all right for a while, and I can park it all day behind the White House.
The New York Times (two cents; late city edition) tells the story of Sept. 21 , 1931:
GREAT BRITAIN SUSPENDS GOLD PAYMENTS TODAY CLOSES STOCK EXCHANGE, DISCOUNT RATE UP TO 6% GERMAN BOERSES SHUT, STOCK MARKET HERE OPEN
Sometimes it pays to compare the troubles of today with those of yesterday. It might cheer you up. We were worse off in 1931. On that September day Herbert Hoover was at the Rapidan camp preparing to go to the American Legion convention at Detroit to oppose the bonus. There was no helicopter to the station and the Secret Service wouldn't let other cars pass the presidential procession, so angry motorists drove behind him for miles and tooted horns. Things like that always happened to Hoover. The bottom dropped out of Wall Street Oct. 29, 1929, and he told the Chamber of Commerce in May 1930, "While the crash only took place six months ago I am convinced we have passed the worst and with continued unity of effort we shall rapidly recover."
Only it didn't happen. Things got worse. There was no Voyager 2 viewing Saturn to lift the spirits, but Rear Admiral Byrd came back from Antarctica and French flier Coste made the first direct flight from Paris to New york -- 37 hours, 38 minutes, and 30 seconds. Fast time; what would they do next!
I remember the mood. . .
Hooever is a compassionate man who believes that depressions are inevitable in the business cycle and will go away if you don't notice them. Governments shouldn't interfere. In England a man named Keynes thinks differently. Hoover in his State of the Union address (December 1930) warns of a dangerous deficit of $180 million. Think of it! He says he won't allow any continuance of the income tax reduction granted in the previous year. He wants a balanced budget. Congress votes to allow veterans to borrow up to 50 percent of the face value of their adjusted service certificates, 14 years before they mature. It shocks Hoover; he says there's "not a penny in the Treasury to meet such a demand." He vetoes and the House overrides him in 43 minutes. The Senate promptly follows. In between times he presses the button to dedicate the new Empire State Building in New York, the highest structure raised by the hand of man. It is 1,250 feet high, with a dirigible mast on top.
So then Britain leaves gold.
America is broke. It is prostate with deflation. Everything costs too little. Prices drop and drop but still people can't buy. A quarter of all Americans live on farms and their bins bulge with food, but men on bread lines in cities don't buy, even at foreclosure prices. Net farm income falls two-thirds. Industry is the same: if you worked in a steel mill before the crash you earned $24.76 a week; now it's $13.58 if you have a job. Business cuts dividends, drops inventories, fires workers. One worker in five is jobless. But Hoover thinks the poor should be aided "neighbor to neighbor, community to community," not by Washington. The government shouldn't give direct aid.
That was 1931. Economists despaired at the low prices. Would they ever rise? Using 1929 as a base of 100, prices had sunk to 80.8 in 1932. The first self-service chain (a novelty), Piggly-Wiggly Stores, offered fresh country eggs , 35 cents a dozen, prime roast 35 cents. Thom McAn sold passable shoes at $4 a pair; Richman sold suits at $29.50. Before it was over these figures would seem high. We were being ruined by low prices. Yes, sir that was how it was when England left gold 50 years ago.