The Class-Backed Dollar

http://www.nysun.com/editorials/the-class-backed-dollar/88395/

The span labeled middle class America were years when society was “without extremes of wealth or poverty, a society of broadly shared prosperity, partly because strong unions, a high minimum wage, and a progressive tax system helped limit inequality.” But the odd thing about it — about Mr. Krugman’s column — is that he fails to mention one other feature of the period. The dollar was defined as a matter of law through most of the period as being a 35th of an ounce of gold. Mr. Krugman’s chart shows the American middle class period running from the 1930s right up until the early 1970s.

What brought that era to an end? Well stub our toe if it wasn’t the beginning of the period of fiat money. This is the period in which Congress stopped defining the dollar in terms of gold and turned to the concept of fiat money, when the dollar was whatever the Federal Reserve said it was and was, in any event, convertible into but another piece of government issued scrip. Mr. Krugman calls the period “the great divergence.” We call it the fiat years, when the value dollar has collapsed to, at last check, less than a 1,385th of an ounce of gold. So here's the real scoop: If the Times wants to recapture the era when the middle class soared, history suggests the thing to do is to define the dollar not in terms of employment or gender or class but in terms of gold.