The Buck Stopped Then
By JAMES GRANT
NYT
CRITICS of the administration’s Wall Street bailout condemn the waste of taxpayer dollars. But the taxpayers aren’t the weightiest American financial constituency, even in this election year. The dollar is the world’s currency. And it is on the world’s opinion of the dollar that the Treasury’s plan ultimately hangs.
It hangs by a thread, if Monday’s steep drop of the greenback against the euro is any indication. We Americans, constitutionally inattentive to developments in the foreign exchange markets, should be grateful for what we have. That a piece of paper of no intrinsic value should pass for good money the world over is nothing less than a secular miracle. We pay our bills with it. And our creditors not only accept it, they also obligingly invest it in American securities, including our slightly shop-soiled mortgage-backed securities. Every year but one since 1982, this country has consumed much more than it has produced, and it has managed to discharge its debts with the money that it alone can lawfully print.
No other nation ever had it quite so good. Before the dollar, the pound sterling was the pre-eminent monetary brand. But when Britannia ruled the waves, the pound was backed by gold. You could exchange pound notes for gold coin, and vice versa, at the fixed statutory rate.
Today’s dollar, in contrast, is faith-based. Since 1971, nothing has stood behind it except the world’s good opinion of the United States. And now, watching the largest American financial institutions quake, and the administration fly from one emergency stopgap to the next, the world is changing its mind.
(Continued here.)
NYT
CRITICS of the administration’s Wall Street bailout condemn the waste of taxpayer dollars. But the taxpayers aren’t the weightiest American financial constituency, even in this election year. The dollar is the world’s currency. And it is on the world’s opinion of the dollar that the Treasury’s plan ultimately hangs.
It hangs by a thread, if Monday’s steep drop of the greenback against the euro is any indication. We Americans, constitutionally inattentive to developments in the foreign exchange markets, should be grateful for what we have. That a piece of paper of no intrinsic value should pass for good money the world over is nothing less than a secular miracle. We pay our bills with it. And our creditors not only accept it, they also obligingly invest it in American securities, including our slightly shop-soiled mortgage-backed securities. Every year but one since 1982, this country has consumed much more than it has produced, and it has managed to discharge its debts with the money that it alone can lawfully print.
No other nation ever had it quite so good. Before the dollar, the pound sterling was the pre-eminent monetary brand. But when Britannia ruled the waves, the pound was backed by gold. You could exchange pound notes for gold coin, and vice versa, at the fixed statutory rate.
Today’s dollar, in contrast, is faith-based. Since 1971, nothing has stood behind it except the world’s good opinion of the United States. And now, watching the largest American financial institutions quake, and the administration fly from one emergency stopgap to the next, the world is changing its mind.
(Continued here.)
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