📚 American Default by Sebastian Edwards
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The economic landscape of the 1930's was a tumultuous one for the United States. While reading, a few things stuck out.
Changing perspectives on FDR
Before delving into the book, I, like many, held FDR in high regard among U.S Presidents. The New Deal policies you go over in history class are often credited with rescuing the nation from the depths of the Great Depression. However, this book challenged the frame of mind I held. It revealed the extent which Roosevelt was willing to manipulate the economic landscape to secure political advantages. Edwards' research and storytelling made me question my stance on FDR's legacy.
Gold and what it represents
The full title of the book is American Default - The Untold Story of FDR, the Supreme Court, and the Battle over Gold. The gold standard meant the U.S. dollar was backed by a fixed amount of gold, and the government was committed to maintaining the value of the dollar in terms of gold. This commitment to convertibility instilled confidence in the dollar and limited the government's ability to manipulate the money supply. Then the Depression happened. After the Depression the gold standard presented challenges for the U.S. economy. Maintaining it meant keeping the value of the dollar stable, which meant contractionary policies like higher interest rates and reduced money supply. Only adding fuel to the fire that was the economic crisis. Edwards goes into detail about the perspectives on contract law from both sides of the discussion.
Economic manipulation for political gain
FDR's 1932 campaign ran around the idea of raising commodity prices and providing relief to the unemployed. The real question is how do you raise commodity prices? In 1933 we abandoned the gold standard. FDR's administration needed to stimulate the economy and fight deflation, and chose to devalue the dollar. It boosted exports and domestic production. It gave the US an advantage in international trade negotiations, and most of the worlds gold began to move onto US soil. However, it was a new high, a new power, that no president had held prior. FDR realized this, and so did his Brain Trust. This brings me to my favorite quote in the book.
... George F. Warren was the most influential economist in the world. Almost every morning during November and December (1933), he met with FDR while the president was still in bed, and helped him decide the price at which the government would buy gold during the next twenty-four hours. Henry Morgenthau Jr. who often attended these meeting, confined to his diary that the process had a cabalistic dimension to it. In selecting the daily price, FDR would, jokingly, consider the meaning of numbers, or flip coins... He would then write the new price on a piece of paper, which he handed to Jesse Jones, the chairman of Reconstruction Finance Corporation.
My bitcoin brain had a few flutters throughout the book. It's very existence highlights the enduring concern about government interference with financial matters.
Overall this book was good, not great. Any book that challenges my long-held perceptions is good.