A long, long time ago...:
Founding Fathers' splendor
How the budget, they would reconcile
And they were loathe to take a chance
By using steady debt finance
New country: it would sap ye in a while

The Revolution: cost, they'd shiver [1]
But worth it: freedom, to deliver
Bad notes were the "greenbacks"
Just one way to redeem: Tax [2]

We've watched the dollar's value slide
Vote for freebies, folks: a rising tide
I knew the US lost its pride
The day the gold "buck" died [3]

So my, my, see the printing press fly
Wilson's drama gave Obama ways to wave it bye-bye [4]
And we poor ol' folks, plain people; just you and I
Stingin'; This is TT telling; no lie
Think things *tough*? T-T tells you why

It's such blight, what we've been told
Since most nations placed their faith in gold
Since the Bible days, or so [5]
They *all* perceived: won't rust/corrode
Enthused at finding "motherlode"
You can't impeach its worth; Finance? *Real* dough

This: well-known; but poor us: Gov, on whim
Passed a law; our chances: rather slim
He outlawed gold, like booze [6]
And we sing out with him, our blues

We issued only coinage: gold, mint struck
Would exchange, our nation, gold for ev'ry buck [7]
But I know we got really stuck [8]
The day the gold "buck" died

Of all our savings:
Woe, me; per-cent drop: 43 [9]
Thieving caper: gave us paper by His Royal Decree
"Progressive" noises making nation less free
Transferrin' power to the Congress: awry
Stranglehold on money supply

Seven decades: dollar on its own
And debt grows fast as a sub-prime loan
But that's not how it used to be
When F. Roosevelt said that we must redeem
All our gold; turn in; you'd best come clean
Left no choice: he raped both you and me [10]

Oh, and once the King stole golden crown
He drove the dollar's value down
This paper, you could burn
No gold would be returned

And while Roosevelt followed line of Marx
The US wallowed in the dark
Amid depression, deep and stark
The day gold standard died

Paper, flingin'
Bye-bye, 'cause its value, deny
Took the gold out; we were sold out by that old, loutish guy
While Western world was sinkin'; on us, rely
But thinkin', "This'll weaken major ally"
World War II cause: Treaty, Versailles [11]

Gen'ral Sherman said that "War is Hell", Sir!
The Civ-il War: That was said quite well, Sir
Debt piled high, and growing fast [11]
Atlanta fell on its a*s
The soldiers died; war was lost, at last
And your chest of ... Southern dollars ... turned to grass

Reconstruction there from beaten gloom:
Gold and argents: trade; their march, resume [12]
And progress did advance
All reunited: brand new chance!

'Cause as players played, and wheeled and dealed
The worthless bucks were soon repealed [13]
The US moved toward head of field
Until the gold buck died

The US swinging!
Oh, oh, watch America grow
Quite excited and delighted; by war, blighted no mo'
While rest of world, they must have envied us so
And bringin' immigrants to our "golden" shore
"Lift my lamp beside golden door"

Oh, and there they were all in one place
At Bretton Woods: war's scars, erase? [14]
Let's all sit down and try again
So come on: US strongest; US stocks --
-- Gold bricks: world's largest, at Fort Knox;
On dollar, other currencies depend

Deficit spending: all the rage [15]
The 60s: drenched in red ink, page
No pol would taxes, raise
So paper money pays

And as the debt climbed high, a scary sight
And print the artificial blight
And inflation taking mighty bite
Because the gold buck died

Nineteen-sevn'ty:
Soar, sore, as inflation did roar
Dollars, holdin': turned for gold, in; coldly, Dick slammed the door [16]
Those good old days of golden dollars: No more
And bring "Stagflation" like we ain't had before:
Prices rise, but jobs fall; we're poor

Fin'lly, someone to end our blues [17]
Though for short term, not such happy news
But Reagan held course and wouldn't sway
Only way: sanit-y, restore:
The recession: less than years before [18]
But soon after, we went back to our old way

And in D. C., the pols all schemed
They promised, lied: they'd fulfill all dreams
But money: still a token
Stock market: boomed, then broken [19]

But with paper money, still we're hosed [20]
The housing boom: mortgage, overdosed
And soon, the last house gets foreclosed
Because the gold buck died [21]

We're all cryin'
Scream, scream for American dream
Paper: bevy; taxes, levy; under either regime
D. C. girls and boys are pickin' *our* pockets clean
Sayin' "Vote for me; I'll pay you in pork"
Think the money comes from the stork?
[bonus echo:]
No, it's our *own* money, you dork!

Doom, they're bringin'
My, my, kiss the US good-bye
Congress: wh*rehouse; to the poorhouse, drive this poor louse-y guy
Their evil ploys are stinkin'; risky, each try
Now, when US fades away, you'll know why




[1] The first native currency (as opposed to British and Spanish coinage) issued by what were then the American colonies was a paper currency issued by the Continental Congress to finance the Revolutionary War that began in 1775. The "Continental Currency" suffered from printing press inflation (same as we have today), and also from massive British counterfeiting as an act of war to destabilize the economy of the colonies. By the end of 1779, they retained only 1/25 of their value against real metal coinage.

[2] To redeem this paper money, each colony was required to pay its proportion, in four annual payments, the first by the last of November, 1779, and the last by the end of November, 1782.

Pardon a slight anachronism: The term "greenbacks" for paper currency actually originated from notes issued between 1861 and 1862 to help finance the American Civil War. But it fit nicely in the parody here. Sorry. (Paper money was also issued during the War of 1812, after which the US went back on the gold and silver standards.)

[3] The painful experience of the runaway inflation and collapse of the Continental dollar prompted the delegates to the Constitutional Convention to include the gold and silver clause, Article 1, Section 10, in the United States Constitution: "No state shall... make any thing but gold and silver coin a tender in payment of debts." The Continental Currency was replaced by the silver dollar at the rate of 1 silver dollar = 1000 continental dollars.

The U.S. dollar was created and defined by the Coinage Act of 1792. It specified a "dollar" to be between 371 and 416 grains (27.0 g) of silver (depending on purity) and an 'eagle" to be between 247 and 270 grains (17 g) of gold (again depending on purity). So from the git-go, the dollar was a measure and equivalent of a valuable metal, rather than something arbitrarily printed at will by political appointees, as it is today.

The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the price of things to remain fairly constant over time. An alien concept today, when inflation (over-printed, lower-valued dollar = higher prices) is taken for granted, and the only question seems to be, "How much?".

The gold equivalent of the US dollar to the British Pound Sterling ("sterling silver" = 92.5% pure silver, alloyed with copper for hardness, as pure silver is somewhat soft) was ₤1 = $4.86⅔. This exchange rate with sterling remained right up until Britain abandoned the gold standard in 1931.

Did you do the math? The two currencies' relative value remained constant for *139 years* -- for as long as both were backed by tangible value (precious metal.) Compare to the wildly-fluctuating exchange rates seen today.

[4] The Federal Reserve system was signed into law by Democratic President Woodrow Wilson in 1913, in an attempt to stop fluctuations in the economy, which is sort of like trying to stop the ocean from having any waves. It was primarily a response to the Panic (depression) of 1907, and with its ability to print worthless paper money with nothing behind it (that's called "counterfeiting" if you or I do it), its proponents believed that it could prevent all recessions, and even keep the economy in a perpetual boom.

Instead, the United States experienced the worst depression in its history (much worse than the 1907 incident of which Fed proponents promised prevention of repetition) sixteen years later, in 1929. Some economists, including Milton Friedman, Thorstein Veblen, Ben Bernanke, Robert Latham Owen, John Kenneth Galbraith, and Murray Rothbard believe that the Federal Reserve System helped to cause the Great Depression. Tommy Turtle knows for a fact that that the creation of the money-printing Fed, and the resultant bubble of the Roaring 20s, was the *direct cause* of both the Depression and of its record-setting magnitude and duration.

Most Republicans of that era still favored free markets and value-backed currency, but "progressive" Democrats wanted the Government to have complete control over the amount and value of currency. They claimed this would get the financial system "out of the hands of Wall Street", but the hands of Pennsylvania Avenue (i. e., the White House) have done us much more harm. The Federal Reserve Act passed Congress on a mostly partisan basis, with most Democrats in support and most Republicans against it. Yet Republican President Herbert Hoover is still widely blamed for the Great Depression, because he was sitting in the hot seat when the dynamite charge lit by Wilson (the Fed) finally blew up. Go figure.

(The economy was actually beginning to recover when President Franklin Roosevelt took office, but his massive interventions in trying to "cure" the Depression merely prolonged it, and it didn't end until the wartime economy of World War II, a decade after it started. The Depression wasn't the disease, it was the "cure" for the irrational exuberance of the 1920s fueled by the Fed's fake money, just as our current woes are the cure for the huge growth in consumer spending of borrowed money of the 1990s-mid 2000s. Everyone wants to drink and party, but no one wants the hangover. See any parallels today?)

[5] Gold has been a highly sought-after precious metal for coinage, jewelry, and other arts since the beginning of recorded history. It's the most malleable pure metal known -- it can be hammered into sheets only a few *atoms* thick. One gram (1/28 ounce) can make a sheet a meter square (more than 10 square feet), and one ounce can make a sheet of 300 square feet. Hence things can be "gold-plated" with very little gold.

Why is that good? Because it doesn't rust in either air or water. (Hence gold wedding rings, like diamonds, symbolize "forever". Too bad people aren't as resistant to breakdown, eh? :) Gold coins and artwork from three thousand years ago are in fine condition today.

John Maynard Keynes, the Anti-Christ of economic, and therefore human, freedom, called gold a "barbarous relic". (He also said in the 1936 German edition of his book that his policies "can be much easier adapted to the conditions of a totalitarian state .... than .... under conditions of free competition." Later, he disavowed Nazism. "Be careful what you wish for. You might get it." You wished for a totalitarian state in Germany; you got one, John-boy. Don't play innocent with us.)

Iron-ically (heh heh), gold has become, not a "relic", but ever more increasingly useful. Open up your computer (Shut it off and unplug it first, please!), ground yourself, and remove your RAM module. Note that the 200+ contacts are all gold-plated. Why? Because it will *never* rust or corrode, and it conducts electricity *very* well. The extensive use of gold in the ever-growing field of electronics has make it more desirable than ever. Some "barbarous relic", eh, Mr. Keynes?

Gold tooth fillings last forever (the Nazis removed them from the teeth of slaughtered Jews and melted them down to help pay for the war), and "silver" fillings are actually only a quarter to a third silver, and about half mercury. Mercury is highly toxic, causes permanent brain damage, and pollutes the environment, both during preparation and when you're cremated. Go for the gold! (As TT's "silver" fillings from younger days broke down, as they will do, he's replaced them with gold. Costs a lot more up front, but they last for more than a lifetime -- even a turtle's lifetime.)

[6] The US passed a law prohibiting its citizens from possessing alcohol in 1920. The law had disastrous consequences, despite the fact that alcohol can be bad for you. In 1933, the US again permitted its citizens to possess alcohol, but prohibited them from possessing gold currency. This had even more disastrous consequences, because gold currency is good for you.

All attempts to prohibit people from their lawful "pursuit of happiness", as the Declaration of Independence defined as one of the rights of humanity and one of the reasons for establishing the new nation, have been equally disastrous -- including the use of recreational drugs, of which alcohol happens to be one.

[7] Before the disastrous move described, a twenty-dollar gold coin (about one ounce), and a twenty-dollar bill were equivalent -- the bill was a receipt, like your laundry ticket, for the gold in Fort Knox. You could walk into any Federal Reserve bank and exchange your bill for that gold. The bills stated on their face, "The United States of America will pay to the bearer on demand, the sum of Twenty Dollars."

Now take a $20 bill out of your wallet or brassiere.** Look at the front. It says "Federal Reserve Note". What's a "note"? You signed a Promissory Note, or just a "Note", when you financed your car or home. It's an IOU. So what you're holding isn't anything more than an IOU. Not a receipt for gold, silver, or even Chinese lead. See the part about "This note is legal tender for all debts..."? We’re running around trading IOUs as money.

Oh, and on the back, where it says, "In God, we trust"? What that means is, "You'd better pray that this IOU is still good tomorrow."

** TT enjoys economics -- hope we've made it a little less dry and a little more interesting -- but he needs a little comic relief once in a while, and you probably do, too. :) (FG did *not* write the "brassiere" line.)

[8] If this were a less academic parody, there would probably have been a different passive verb here instead of "stuck". It would have to rhyme with "buck", but be in the past tense, ending in "-ed". Hmmm.... any ideas?

[9] See the next verse and footnote for the details.

[10] Probably the largest single act of mass thievery in history, making Bernie Madoff look like Winona Ryder shoplifting clothing. Here's how it worked:

As said above, the dollar was one-twentieth of an ounce of gold, and twenty dollars was one ounce of gold (with slight fluctuations), for 141 years. In 1933, President Roosevelt gave Executive Order 6102, which made all privately held gold of American citizens property of the US Treasury. This gold confiscation by executive order was argued to be unconstitutional, ("Argued" to be? See footnote #3, from the United States Constitution: "No state shall... make any thing but gold and silver coin a tender in payment of debts". Where's the argument? It not only violated the Constitution, it violated the Ten Commandments: "Thou shalt not steal". --TT.) but Roosevelt's executive order asserts authority to do so based on the "War Time Powers Act" of *1917*. (WTF? Even if you're willing to accept the loss of your civil rights and liberties during war [We're not; else, what are we fighting for?], World War I was effectively over by November 1918.) Gold bullion remained illegal for Americans to own until President Ford rescinded the order in 1974.

So, gold was like heroin is today. You could go to jail for just possessing it.

Next: Once he had all of our gold, he "raised its price" from $20/oz. to $35/oz. That's really looking at it backwards: It's gold that's money, and paper is the receipt. So what *really* happened is that the dollar's value was lowered overnight from 1/20th of an ounce of gold to 1/35th of an ounce of gold. Since not everyone is good with fractions, SuperTurtle to the rescue:

You had a savings chest of 500 US gold coins, equal to $10,000.00. (500 x 20, right?)
Your gold is taken from you and the price is raised to $35/oz. $10,000.00 divided by 35 = a little over 285 ounces of gold, assuming that you could buy it back. So your 500 ounces of *real money* was reduced to 285 ounces overnight, a drop of 43%.

Now, we'll look at it in dollar terms, since that's what we're all accustomed to these days:

Since the dollar's value had fallen from .05 oz of gold to .02857 oz of gold, which again is a loss of 43% no matter how you figure it (*trust me*, 'k?), your $10,000 in real money was devalued to $5700 overnight. Roosevelt stole $4,300 from you.

The probable motive for this, aside from giving the Government a complete stranglehold on the economy and on all of us, is that it lowered the true cost to a business of hiring an employee. If the going wage was $2/hr, the devaluation of the dollar meant that this wage *really* only cost the business $1.14/hr ($2 - 43% drop), and hence, might stimulate (where have we heard that word recently?) hiring. Unfortunately, business owners saw their capital and purchasing power shrink overnight, too, so it didn't work. Really, a pretty stupid idea, on top of being just plain theft.

The actual loss to Madoff's investors is estimated by the court-appointed trustee to be $18 billion, not counting phony "paper gains" that never happened. In 1933 terms, that's equal to about $1 billion 86 million. Considering not only the value of the gold confiscated, but the loss in value to everyone holding US paper dollars, Roosevelt's theft must have been many times larger than Madoff's. Yet Madoff is in jail, while Roosevelt remains some kind of cult hero to some people, who think he was a great, or the greatest, President. The only explanation for this that occurs to TT is that humans must be much less rational than turtles.

[11] Two classic examples of what happens to paper money that is not a receipt for actual things of value:

a) The Treaty of Versailles imposed harsh reparation payments on a German nation already crippled from the First World War. Some economists have estimated that in reality, it would have taken until 1998 (80 years) for Germany to make these payments on an affordable basis. Instead, the German government (the Weimar Republic) started printing Deutschmarks rapidly. In 1918, one paper German Mark equaled one gold Mark. By 1923, one gold Mark was worth one trillion (1,000,000,000,000) paper marks. The terrible disruption in living conditions caused by this hyperinflation are regarded by many historians as contributing to the people's readiness to find scapegoats (Jews, for example) and to listen to a demagogue, directly resulting in Nazism and World War II.

b) When the Southern states attempted secession from the US, resulting in the Civil War, they issued paper money; being largely agricultural as opposed to the more industrialized North, they had little with which to back it, only the hope that the notes could be made good if/when they won the war. The Confederate States of America (the South) dollar was first issued into circulation in April 1861.

At first, Confederate currency was accepted throughout the South as a medium of exchange with high purchasing power. As the conflict progressed, however, confidence in the ultimate success waned, the amount of paper money increased, and their dates of redemption were extended further into the future. The inevitable result was depreciation of the currency and soaring prices. By the end of the conflict, a cake of soap could sell for as much as $50, and an ordinary suit of clothes was $2,700. Near the end of the war, the currency became practically worthless as a medium of exchange. When the Confederacy ceased to exist as a political entity at the end of the conflict, the money lost all value, and the cash savings of Southerners were worthless.

(General William Tecumseh Sherman was a leader of the Northern armies, responsible for the capture and sacking of Atlanta, a Southern center of commerce and railroads. The famous phrase "War is hell", possibly apocryphal or paraphrased, was said some fifteen years after that War.)

[12] "Argent" = archaic for "silver", and (geek-note) from the Latin "argentum", which is why silver has the chemical symbol of Ag. Also how Argentina got its name: all the silver that the Spanish conquerors extracted there. (Isn't this *fun*?) Also obsolete expression for "money"; obsolete because money has hardly any silver any more. So "argents" = silver coins. Besides, wasn't it a good sub for "sergeants"? :)

[13] By 1878, the reunited US was completely back on a gold and silver standard for its currency, and industrializing and growing rapidly economically. (Though never in a straight line upward, which seemed to bother some people, despite the fact that nothing else in the Universe behaves that way. Hence, the Fed.)

This economic expansion, made possible by industrialization, free enterprise, and the sound currency which is the underpinning of all, brought huge waves of immigrants to the US from all over Europe and Western and Southern Asia. (The rumor circulated in poorer countries that in America, the streets were paved with gold. Not true, but the dollars were, which is even better.) The last line of the refrain is a paraphrase of the last line of the sonnet by Emma Lazarus that is inscribed on a bronze plaque in the second floor of the pedestal of the statue of Liberty Enlightening The World (almost universally known within the US as merely, "The Statue Of Liberty"), often the first sign of the New World that immigrants saw as their ships approached New York Harbor.

p. s. It's on TT's to-do list to satirize that sonnet, since obviously, no one believes in it anymore. ("Give me your tired, your poor; just not your Mexicans".)

[14] We've already covered 1913 - World War II, with a flashback to the American Civil War. Moving right along:

The United Nations Monetary and Financial Conference, commonly known as the Bretton Woods conference, was a gathering of 730 delegates from all 44 Allied nations at Bretton Woods, New Hampshire, USA, held in July 1944, to try to restore international monetary and financial order after the coming end of World War II. The US and many other nations wanted to encourage free trade and open markets among nations, but our old "friend", John M. Keynes (see Note 5), whose policies strongly influenced FDR, thought that wealthier nations, or those with surpluses, should be forced to subsidize poorer nations, or those with deficits. "Share the wealth" ... anyone heard that term *recently*? (This time, Keynes lost,)

The agreement provided for fixed rates of exchange among currencies (not exactly a free market, since money is a commodity like cars, wheat, and oil), but the only currency strong enough to meet the rising demands for international liquidity was the U.S. dollar. The strength of the U.S. economy, the fixed relationship of the dollar to gold ($35 an ounce), and the commitment of the U.S. government to convert dollars into gold at that price *for foreign countries" made the dollar as good as gold. (US citizens were still forbidden to own gold currency, and would be for another 30 years, when Republican President Gerald R. Ford took gold off the banned-substances list for Americans. Second-class citizens, indeed, lacking the rights of foreigners. Yes, it makes no sense. No, you're not crazy. Yes, the world and our politicians are.)

Yes, despite Roosevelt's manipulations, the dollar re-stabilized at the new $35/oz. level, and after the War, the US was clearly the world's strongest economic power. Other countries gladly pegged the value of their currency to the US dollar due to its gold convertibility.

[15] During the 1960s, the Vietnam War and Democratic President Lyndon B. Johnson's "Great Society" programs caused the Federal budget to spiral, but Johnson, like most politicians, realized that he'd lose support if he raised taxes sufficiently to pay for both. Thus, there were both an increased dollar outflow to foreign countries to pay for the military expenditures, and growing inflation at home, as the Federal Reserve printed the dollars that Johnson was not willing to acquire by taxation.

Important side notes: Inflation, contrary to popular belief, is not "rising prices". Rising prices are in fact a *result* of inflation. Inflation can be defined in six words: "An increase in the money supply". Gold is scarce -- another reason for its value -- and cannot be created artificially. Paper is cheap. Printing more paper dollars makes each worth less -- see Notes 1 and 3 -- and with more dollars in circulation relative to the production of goods and services, prices rise *as a result*.

Despite the 1913 creation of the counterfeiting agency, the Federal Reserve system, this rise was limited during the Roaring Twenties (1920s) by the fact that you could trade in your dollars for gold. With only a relatively-fixed supply of gold, the Fed couldn't print too many dollars, or everyone would demand their gold, and there wouldn't be enough of it.

And *that* is exactly why dictators, totalitarian regimes, and even politicians in a "democracy" hate a gold standard -- because gold is *DISCIPLINE*. It requires a Government to live within its budget. It prevents it from buying votes with handouts and bailouts (anything resonating here?) consisting of worthless paper. In short, it prevents politicians from doing any darn thing they feel like without a means to pay for it.

Politicians prefer inflation to taxation, because they can blame the rising prices on "greedy businesses" instead of on their own irresponsibility. Unfortunately, the foreign countries saw their dollars losing value, and, since they still had the right that US citizens didn't -- to trade their dollars for gold from the US reserves -- they started doing exactly that. At the end of World War II, the US held about 60% of the world's gold reserves. By 1970, the US was down to 16% of the world's reserves -- with the outflow accelerating as the spending and inflation increased. In fact, foreigners could make money by buying US gold at the official price, and selling it on the free market in other countries at a higher price.

The logical answer: Cut the budget drastically; shrink the Government; quit playing global police officer, and quit printing any new dollars. Everyone who thinks that's what happened, raise your hand. (looks around) Ooh, we're reaching people! No hands up! :-)

Instead, the Bretton Woods agreement was modified to somewhat of a limited, floating-rate system, and the "official" price of gold was up to $42.22/oz. by 1971. Also -- and yer gonna *love* this, folks -- Republican President Richard M. Nixon *lifted import quotas on foreign oil" to reduce energy costs in the US. Yep, you read that right. The US had had limits on the amount of oil that could be bought from foreign countries, to help protect the American oil industry from the cheaper prices of foreign oil (meaning you paid more for gasoline, of course). However, Nixon's move backfired -- the surge in purchases of foreign oil sent even more dollars overseas, and the oil-rich nations were smart enough to start turning them in for gold. The US -- running out of gold. What to do?

[16] So on August 15, 1971, President Nixon, without consulting the international monetary councils or even his own State Department, unilaterally "closed the gold window", making the dollar inconvertible to foreigners as well as to US citizens. This greatly reduced the value of the dollar, and also removed the last little bit of that "DISCIPLINE" (See note 15) on Congress and the Administration. They could now spend at will and print money at will. The result: the inflationary spiral of the 1970s.

(Who ever thought of Roosevelt and Nixon as brothers under the skin? One started the destruction of the gold standard; one finished it; both did it by "executive order", not by laws passed by Congress. Who said the US is a democracy? It's become an elected monarchy -- alas.)

The answer: Gerald Ford's "WIN" buttons to wear on your shirt. "WIN" = Whip Inflation Now. Good idea -- horsewhip every politician who supports any deficit spending. :) But what it really did was, again, put the blame on the victim, i. e. the consumer. In 1973, the Bretton Woods currency-exchange markets closed, and within a few years, all currencies floated in value according to the long-forgotten Law of Supply and Demand, which always wins in the end. In 1980, the price of gold passed the level of $800/oz., which in today's even-more-inflated (devalued) dollars, is equal to well over $2,000/oz.

Nixon's final nail in gold's coffin also brought a new term into both economic and public use: "stagflation", a portmanteau (combination) of "stagnation" and "inflation". For the previous 200 years, including the Great Depression, recessions were marked by high unemployment, but stable or even falling prices as demand fell. (Remember the Law of Supply and Demand from the paragraph above?) Periods of high inflation had indicated a booming economy, with workers in high demand, growing wages, and low unemployment. However, after six decades of economic insults, the 1970s brought for the first time a period of high inflation with little or no real economic growth, and above-average unemployment, too. Hence the term, "stagflation".

Political side note: In the 1976 POTUS election campaign, Democratic Candidate Jimmy Carter took advantage of this to attack the incumbent, Republican Gerald Ford. Carter's campaign coined what they called the "misery index" -- the percentage rate of inflation plus the percentage rate of unemployment. It proved highly effective; Carter won. (Ford's pardon of Nixon for Watergate didn't help him any, either.) But this, too, backfired: In the 1980 POTUS race, Republican candidate Ronald Reagan pointed to Carter's 1976 campaign, then cited the inconvenient (to Carter) fact that the "misery index" was now significantly higher than it was when Carter took office. Reagan's campaign was simple: "Are you better off now than you were four years ago?" For most, the answer was "no". Reagan won in a landslide, capturing 60% of the popular vote, more than 90% of the Electoral College vote, and winning 44 states to Carter's 6 states plus the District of Columbia (Washington, D. C.)

(Bonus credit if you noticed that Ford was being blamed for events set in motion by Lyndon Johnson's 1960s spending spree, just as President Herbert Hoover was blamed for the 1929 depression that was set in motion by the creation of the Fed in 1913.)

[17] Like the Fed's first bubble in the 1920s, leading to the Great Depression of the 1930s, this one too burst, but this time, Roosevelt wasn't around to make it worse. The mistakes were eventually realized and corrected as follows:

In 1978, G. William Miller became Chairman of the Fed, the first, and currently only, Federal Reserve Chairman to come from a corporate background, rather than from economics or finance. (Maybe they should have made TT the Fed Chairturtle instead?) Despite rising inflation, Miller maintained a Keynesian belief that inflation could "prime the pump" of the economy, and would at any rate be self-correcting. He thus took no action against the inflation, and opposed raising interest rates. The effect of this was to send the dollar's value spiraling downward. In November 1978, only 11 months into his term, the dollar had fallen nearly 34% against the German mark and almost 42% against the Japanese yen

As one writer put it, "Under Arthur Burns, who chaired the Fed from 1970 to 1978, and under G. William Miller, who was chairman from January 1978 to August 1979, the Fed provided the monetary fuel for an inflation that began as a flicker and grew into a fearsome blaze... If Nixon appointee Burns lit the fire, Miller poured gasoline on it during the administration of President Jimmy Carter. Without question the most partisan and least respected chairman in the Fed's history, this former Textron executive worked in tandem with fellow Carter appointee, Treasury Secretary W. Michael Blumenthal, in pursuit of monetary policies that were expansionist domestically and devaluationist internationally. The goals were to spur employment and exports, with little thought to the dollar's value. By early 1980, inflation was running at 14 percent."

In 1979, Democratic President Jimmy Carter appointed Paul Volcker to replace Miller as Chairman of the Fed. Volcker had the guts to do what Roosevelt didn't: to take the short-term pain for the long-term cure. Since Congress could no longer have money printed at will under Volcker's chairmanship as it did under Miller's, and no one wants higher taxes, the only alternative was borrowing to finance the Federal deficit. Previously, the Fed itself would buy these Treasury bonds, a process called "monetizing the debt", since the Fed merely printed the money to lend to the Treasury. Volcker wouldn't do that. He allowed rates to rise to their natural, free-market levels - as much as 21.5% on the banks' corporate prime rate and 15.5% on home mortgages to the best-qualified buyers -- the painful cure for the disease of the past two decades. (It didn't happen in time to save Carter, who lost the 1980 election to Reagan, as above.)

[18] This naturally resulted in a severe recession, but newly-elected Republican President Ronald Reagan stood by Volcker, despite widespread protests from both politicians and public. However, the painful, but necessary, surgery worked: Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983, and a recovery began. The recession lasted only a couple of years, versus the decade-long 1929 Depression (which might still be with us without the intervention of WW II).

[19] But the underlying unsoundness of our monetary and budgetary policies remained, with our fortune in the hands of whoever happens to hold the reins at the moment, with no regard for balanced budgets (a requirement the Founding Fathers forgot to put in the Constitution), no discipline from a gold standard, only who can buy how many votes and blame someone else for the results. Loosening lending standards and a massive increase in consumer debt caused a boom in the stock market during the 1990s, which burst in 1999-2000, only to see the boom from all that easy credit shifted to the housing market. Which burst.

The answer: Massive bailouts to the incompetent, massive new "stimulus packages" (remember Roosevelt, Keynes, and G. William Miller?), paid for by printing-press money. This isn't a "change we can believe in"; it isn't even a change. It's the same ol', same ol', with brief exceptions, since the Federal Reserve was created in 1913 to "smooth out economic fluctuations, prevent recessions, and maintain continuous growth". Mission accomplished? You be the judge.

[20] Comic relief time again: "hosed" as in "flowing from a hose", and "hosed" as in either "beaten with a rubber hose" or "up your nose with a rubber hose". Or "up your ..." n/m, that's enough CR for now. :)

[21] Government cannot make the pie bigger. Governments produce nothing. They can cut the pie into smaller pieces, or take part of your slice and give it to someone else, or shrink the pie with foolish policies, or make each slice worth less. Handing out pie that isn't there does *not* make the pie bigger. If you don't believe it, try it yourself. Bake a 9" apple pie, cut it into 8 slices, and invite 50 friends over for pie and coffee. No, Government can't make that work any better than you can, but they're still trying as we speak. Now you know the inevitable results.

And here we are. And will continue to be, unless and until our irresponsible politicians, who apparently can't even keep their zippers zipped up, are reined in by Constitutional amendments requiring balanced Federal budgets and a return to the gold standard.

As Lily Tomlin of "Laugh-In" and "Saturday Night Live" used to say, "And That's the Truth".