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| Author: | Amity Shlaes, Senior Fellow for Economic History |
|---|
June 18, 2008
Bloomberg
June 18 (Bloomberg)—American leaders tell themselves that citizens aren’t interested in the nuances of the dollar’s value. The yuan exchange rate? That is something Treasury Secretary Henry Paulson deals with at summits like the one this week with Chinese Vice Premier Wang Qishan at Annapolis, Maryland. The inflation rate? Federal Reserve Chairman Ben Bernanke grapples with it. The rest just live with the results.
The politicians deceive themselves. Each American brain is constantly updating and editing its own personal dollar index. Americans also try out their theories about their greenbacks in all fields, including mundane thickets of contract law cases.
Just such a case involving a 400,000-square-foot building in Cleveland is now being decided in the U.S. Court of Appeals for the Sixth Circuit. The case illuminates the U.S. government mischief with the dollar over the past century so well that it might even be worthy of the attention of Vice Premier Wang.
This story begins more than nine decades ago, when Americans were sanguine about the prospects for their country’s growth. But they were also concerned about two sources of dollar anxiety.
The first was war in Europe. The second was a new agency in Washington—the Fed, established to manage monetary policy in 1913. The government itself was on the gold standard at $20.67 an ounce.
With a nose every bit as acute of that of Jean-Claude Trichet, Midwestern merchants picked up the scent of inflation.
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