Good as Gold

James Grant is the best-spoken and most accomplished hard-money man in Wall Street. Plenty of people can inveigh against the Fed; the publisher of Grant’s Interest Rate Observer can put it in the context of today’s financial markets and also in the context of history.

Grant is also a historian. He wrote a biography of John Adams, and another of financier Bernard Baruch, and several other histories, including my favorite among his works, The Trouble with Prosperity: The Loss of Fear, the Rise of Speculation and the Risk to American Savings (1996). His new book, “Mr. Speaker! Mr. Speaker!” should be of particular interest to readers of Liberty.

That’s not because of any deep interest I have in his nominal subject, Thomas B. Reed (1839–1902). Reed was a moderately interesting figure. He was fat, he ate fish balls for breakfast, and he spoke French. He was a congressman from Maine, first elected in the centennial year, 1876. He was a man of his time, a Republican stalwart who supported the tariff and gold and opposed foreign wars. Though he was for woman suffrage, he was no progressive, at least in the sense that today’s progressives are. He had no desire to teach other people how to live. “Pure in his personal conduct,” Grant writes, “he had no interest in instructing the impure.”

During the 1890s, Reed was speaker of the House. His claim to fame is how he changed the House rules to give himself, and the majority, much more power to get things done. Whether that was good or bad depends on your point of view.

Parts of the book are about Reed’s parliamentary maneuverings and also about his wit. These parts are well-written, but I was not much interested in them. The greater part of the book, however, is about the financial events and national political battles from 1870 or so to 1899, which I found very interesting.

Grant covers several such things, from the collapse of the Freedmen’s Bank to the stolen election of 1876. He has a particular interest in the currency. One story he tells is of Lincoln’s printing of greenbacks during the Civil War, and the struggle afterward over restoring the link to gold. In the ideology of the day, restoration was necessary. It was part of honorable dealing. But people dragged their feet about doing it, because a national debt had been piled up during the war, and what was the need to repay investors in gold if they had bought bonds with greenbacks? And besides, there was a boom on, and shrinking the money supply would spoil it.

The boom went bust in 1873. For the rest of the decade the country was arguing about the commitment to return to gold. The way in which this argument was conducted was much different from the way it would be today. Now gold is the money of the distant past. In the 1870s, Grant observes, “Gold was the money of the future”:

“A 21st century student of monetary affairs may stare in wonder at the nature of the monetary debate in mid 1870s America. A business depression was in progress. From the south, west and parts of the east arose a demand for a cheaper and more abundant currency. Yet such appeals were met with, and finally subdued by, a countervailing demand for a constant, objective and honest standard of value.”

“Resumption day” was Jan. 1, 1879. There followed “a mighty boom.” In the 1880s, prices fell 4.2% and wages rose.

This was the era of laissez-faire. “The government delivered the mails, maintained the federal courts, battled the Indians, examined the nationally chartered banks, fielded the army, floated the navy and coined the currency.” The big social program was Civil War pensions — for the Union side, not the Confederates. By the standards of the day, the Democrats were the small-government party and the Republicans were the big-government party, but policy differences were at the margin only.

The federal government was funded by the tariff, which the Republicans, and Reed, thought was good for American labor. The Democrats quoted the free-trade arguments of Frédéric Bastiat. “The Republicans,” Grant writes, “having no ready answer for Bastiat’s arguments, were reduced to pointing out that he was, indeed, French.”

The ideological atmosphere started changing in the 1890s. The Panic of 1893 brought on a severe depression, and another political battle over the currency. This time the supporters of gold battled it out with the supporters of silver, with bimetallists arguing for both at once.

Grant provides the best explanation of the gold-versus-silver battle I have read, especially the futility of having two metallic standards at the same time. Here he is not so proud of Thomas Reed, who was by then speaker: “One senses, reading him, that he was not quite sure what the gold standard was all about.” Reed’s position “lacked clarity, or, one might even say, courage. [President Grover] Cleveland had one unshakable conviction, which was gold. Reed had many convictions, only one of which — no free silver — was strictly nonnegotiable.”

Reed’s final battle was over war with Spain. He was against it. The new president, William McKinley, seemed to be against it, but lacked the courage really to oppose it. Ex-President Cleveland was against it, as was William Jennings Bryan, the presidential candidate whom McKinley had beaten in 1896. But the Congress was for it, and even with his self-enhanced power as speaker, Reed couldn’t block the war resolution of 1898. It passed the House 310 to 6.

A year later, Reed resigned. He wrote to a friend, “You have little idea what a swarming back to savagery has taken place in this land of liberty.” Publicly he said nothing. Three years later he was dead.

And so Grant ends his book. It is a fine book. I recommend it. Don’t be put off by any lack of interest you may have in Thomas B. Reed. I wasn’t much interested in him, either. You don’t have to be.