Glenn refers to Richard Nixon demonetizing* the Dollar, and then the Great Society taking off. Actually, Glenn has his order wrong. Lyndon Johnson was the President responsible for both the Great Society and demonetizing the Dollar. President Nixon removed the backing of international redemption of the Dollar in gold after Charles de Gaulle of France realizing the gold was undervalued began a run on it**. Ironically, the die for runaway inflation was cast several years earlier in March of 1964 by C. Douglas Dillon, Secretary of the Treasury under LBJ. It was the demonitization of silver that allowed the runaway printing of Dollar notes as they were already not redeemable in Gold, merely Silver. And as I have pointed out in previous editions of this blog, a Silver Certificate was a reciept or certification of an amount of Silver. That formed a natural drag on the amount of currency in circulation. The Federal Reserve Note has no such limitation - hence the problem.
Alright, that puts me firmly in the column for metal backed money, right? Not entirely. Previous Depressions (Yes, there were Depression prior to 1929) were caused by the lack of circulating currency, not by lack of wealth. Hoarding, if you will. The Government or someone needed to insert some liquidity into the economy. This was solved by several kinds of unique, not as easily hoarded currency - The United States Note and the Federal Reserve Note. A note is a loan backed by the assets of the issuing agency.
* Does anybody else see the similarity between 'demonetizing' and 'demonizing'?
** Despite the fact that they never repaid their war debt from World War II. Always the double standard.
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