would go back into the union. there was this western block of states. alabama, mississippi, whose leaders felt they were being largely ignored by the confederate capital in richmond. i don't know there was talk of them flying away instead. but it is interesting that under the constitution, they never mentioned word. they avoid ever mentioning secession. some main it is because if they wrote it in implicitly, they were not sure it was implicitly a right all along. there were the others who said if we make it possible for one of us to do to us what we just did to them, where are we going to be? on the other hand -- and there were those that actually thought the dissolution of the union would continue and northern

states would gradually realign themselves with the growing confederacy. and one day there may be one nation, but it would be the confederate states of america. the new city on the hill under the more perfect constitution. >> you know, we haven't even had a chance tonight to speak about something that both of you have written about. lincoln's superior writing and a great communicator. there are so many things we left out in the hour that sped by. i'm reminded that abraham lincoln arrived to assume his role as president and ultimately commander in chief in disguise. coming through baltimore in disguise that was exaggerated into a notion of a scotch cap and military cloak. jefferson davis left his position as commander in chief some whispered in disguise. a more demeaning one. his wife's rain coat which was

exaggerated into hoop skirts. and the reputations for leadership and military ability had similarly flipped in that four-year period. the eyes of history turned to abraham lincoln. experience wasn't enough, on the job training and evolution proved to be more important. it is true that history almost always belongs to the winners. about 30 minutes ago, i mentioned john hausman and i will end and thank the gentlemen by way of saying lincoln earned his reputation. thank you, jack and jim. [ applause ] the civil war airs here every saturday at 6:00 and 10:00 p.m. and sundays at 11:00 a.m.

eastern time. to watch more of the civil war programming anytime, visit our web site at c-span.org/history. to see what we are up to during the week, join us online. follow us on twitter at c-spanhistory or facebook.com. you are watching american history tv. all weekend. every weekend on c-span 3. coming up next, a discussion on the history of the gold standard. three panelists, lewis lehrman discuss the draw backs of the system and why the u.s. left the gold standard and the arguments for reinstating it. the new york historical society hosted the event and it is just over an hour.

>> so thank you, dale, distinguished guests, james grant, and i have been given, each of us, five minutes to introduce the subject of this evening, namely, the true gold standard. in five whole minutes, therefore, we are to summarize 3,000 years of monetary history, monetary theory, and monetary policy, all of which are bound up with the history of the gold standard. it is a great challenge, but i surrender because we have in mr. chancellor the moderator one of the outstanding financial historians of our time and his cross-examination of mr. grant and of me, the moderator will elucidate the historic debate, arguments and evidence concerning the gold standard. i choose instead during the scarce five minutes given me to

do as the lawyers do, namely, to set forth the conclusions to which i have arrived as a result of my experience in the financial markets, my research and study, all of which can be examined in my published writings, one of which is available this evening, as dale said. now, herewith, my conclusion and a modest proposal -- america and the world desperately need monetary and financial reform. indeed, they need a modernized 21st century gold standard. the gold standard that is currency convertibility to gold is the simple proven global monetary standard by which to transmit uniform and reliable price information worldwide and to reestablish order in the chaos of our financial markets today. unlike central bank manipulated

floating paper currencies of today, a stable dollar defined in law as a specific weight unit of gold exhibits the optimum impartial networking effects characteristic of our electronic age, of transparent global standards, not unlike the efforts to agree global communication standards, global standards. and global banking standards. but all we know that the dollar can be produced at zero marginal cost, a level to which it seems to be gravitating. but a gold dollar does require real human labor and real capital to be produced. the data shows that the purchasing power of gold is steady, even constant, over centuries. whereas the paper dollar adjusted by the cpi has lost 85% of its purchasing power since

1971. just a short time ago when the u.s. repudiated the gold backing of the dollar. now, the united states has the ability to lead in the coming age of monetary reform by unilateral resumption of its monetary standard, namely gold. unilateral -- means that the united states dollar will be defined in congress in federal statute as a certain weight unit of gold, just as the dollar was defined from the birth of the republic, that is to say the coinage act of 1792, until 1971. the u.s. treasury and the federal reserve and banking system will be responsible for maintaining the statutory gold value of the united states dollar. now, what would such a financial world look like in the united

states? first, all financial claims, all banks under federal law that are payable in dollars shall be redeemable in gold at statutory rate without restriction. dollar demand deposits, for example, checking accounts will be redeemable in gold upon demand. but other dollar claims, of course, redeemable at maturity. second, along with customary bank notes and bank checking accounts, americans will be free to use gold and authorized mint-issued gold coins as money without restriction or taxation. the treasury and authorized private mints will provide for the minting of legal tender gold coins. may i repeat that from 1792 until 1971 the dollar was defined in law as a specific weight unit of gold and earlier

silver, as required by article 1 section 8 of the united states constitution, the supreme law of the land, congress would again establish by statute after due deliberation the sustainable gold value of the dollar, that is to say the convertibility price of the dollar to gold. third, by international gold standard is it meant that gold, not paper dollars nor any other currency nor the special drawing rights of the international monetary fund, so-called sdrs, only gold would be the primary means by which nations settle their residual balance of payment deficit in order to rebalance world trade as it has not been since 1914. the gold monetary standard was proven in the only laboratory available to human beings, the laboratory of 3,000 years of human history. the gold standard was

universally accepted money. it is the necessary remedy for the defect of unstable floating depreciating, manipulated central bank paper currencies of today. it is the primary cause of today's currency wars and of systemic inflation and deflation. indeed, the federal reserve system, america's central bank is the headwaters of the floodtide of subsidies to the cartelized banking system and social inequality it has created. now, in an imperfect world, people by imperfect human beings there can be no perfect monetary system. nor is the case for gold the case for investment in gold. on the contrary. based on a prudent consideration of monetary history, the case for the gold standard is an

argument from tested principle, the purpose being to establish optimum monetary standard for a stable growing, equitable international economic and social order. by the test of centuries, the gold standard, the true gold standard, without reserve currencies is the least imperfect monetary system of history. thank you, and over to mr. grant. >> well, just as lew said, we humans are not very good with money and especially not very good with paper money. for 41 years and counting, the dollar has been a piece of paper of no intrinsic value and over these 41 years our banks have become ever wobblier on the authority of ben espernot, phd, a dozen major financial institutions were at death's door in 2008. in that our great recession, the u.s. economy shrank by a few percentage points only, yet no

major bank failed in the ugly depression of 1920, '21, and no major bank failed in the still you go ier depression of 1929, '33. between 1929 and 1933, the economy was virtually sawed in half. imagine what wreckage that would do today in our subsidized and cartelized financial system. today's bankers, i suppose, are no less capable than their forbearers. what accounts, then, for the accident proneness for the 21st century financial system? in my opinion, what accounts for it is the incentives we have put in place in paper money, in the socialization of financial risk, and in the doctrine of too big to fail, we have hit the trifecta of incentives to

failure. part and parcel to the gold standard was a system of banking and the salient feature of that system was solvency. in a gold standard checking accounts, as lew mentioned, are payable immediately in gold, gold is the balance, the anchor. and among other things, what gold anchors is the feet of the bankers. in the gold standard and in the political ethos prevailing during the gold standard years, there was a sense that a banker ought to be personally responsible for his or her undertaking. many banks during the gold standard era were partnerships and, of course, a partner in a general partnership is liable for the debts of his or her firm up until his or her entire net worth. lew also mentioned there is no perfect system.

in the high noon of the gold standard in britain in 1890, a firm called baring brothers brought out an issue of ordinary shares in the buenos aires and britain scowled at the treasury, the treasury scowled back. they got up a fund and presently the city and the uk financial reputation was saved through the intervention of the bank implicitly by the government and overtly by the bankers themselves. it was not a laissez faire system exactly, but it was close to one. lord revelstone, senior partner of baring brothers lost his

estate and his fine collection of french furniture and paintings. we have gotten away from that. we have let lapse, for example, erased from the statute books a law that required in a limited liability banking institution, a corporation, we have erased the law that required in the event of that bank's failure the stockholders would get the capital call. it was, after all, their bank and not the government's. all that is gone. in its place we have the unstinting issuance of -- currency and we have the creeping, no galloping, through the doctrine that some institutions must be favored, some institutions are too big to fail. so on a micro level as well as on a macro level, it seems to be the serious consideration of a true gold standard is front and center. >> thank you, jim.

may i start with you on this issue of what you call the true gold standard. it seems to me the advocates of the gold standard was to defend marxism by saying it hadn't been properly implemented. i think back 3,000 years of gold standard, and what one finds is a number of different types of regime and always an argument about how it should be implemented. the debasement, the changing of the valuation of gold currency in the 17th and early 18th century, arguments about bimetallism lately, and then the other technical argument in britain in the 19th century between the banking and currency school as to whether you should limit the issue of notes or also limit deposits, control deposits.

then you have the gold exchange standard of the 1920s and lately, more recently, bretton woods, and each of those systems seem to have its flaws, each seem to break down. and the so-called classical gold standard i think lasted, what, 39 years, from the 1870s just up to the first world war. so actually had a very brief period perhaps coincident with british imperial hegemony. >> there was that, was there? >> briefly. what do you make of this, the fact that the gold standard is always morphing, always in a way failing from one incarnation to another? >> may i begin just by saying i often thought of the keynesians as the marxists of today. you're scandalizing me. let's just use a couple of

concrete examples to begin a brief answer. sir isaac newton established the basis of the english pound sterling in 1717, the very same isaac newton who pioneered the scientific revolution of the 17th and early 18th century. the weight unit which was established by law of the english pound in gold lasted until 1914. so, with all respect for edwards' dating, we had a 200-year constant unit of value established as the currency of first england and then of course the united kingdom. the gold standard was prevailing in the united states by virtue of the coinage act of 1792.

in 1792, it was a bi-metallic system, gold and silver, which edward suggested itself had certain flaws which we haven't time to get into. but by 1834, gold was the sole established weight unit of the dollar, and it was defined in law as the currency of the united states. it was constant in its purchasing power and in its definition, but for the interruption of the civil war, until 1934. so the value of a currency defined by statute in gold weight had many examples in this feeble, imperfect laboratory of human history of a very stable purchasing power. what edward i think is getting at is that there were always

bankers and politicians who wished to prorate the monetary system in order to finance political subsidies to privileged classes, including cartelized banking systems or military establishments. for example, it is a fact that the bank of england was established not to be the lender of last resort, despite the comments of chairman bernanke in his lecture in washington, the bank of england was established to finance the fisc of the united kingdom. the first central banks of germany, the reich bank of prussia, was established to finance the prussian army. napoleon's establishment of the bank of france was not -- but it

was established to finance napoleon's campaigns. so central banks themselves have a very checkered history, both from their origin to this very day, as jim grant was saying, of financing certain political priorities established by either ruling classes, monarchies or even democratic majorities. what a currency established by law as a weight unit of gold, without any exorbitant privileges given to the british pound or the united states dollar, as was the case under bretton woods in 1944 to 1971, or in the inner war period, 1918 to 1941, to the pound and the dollar alike, without any privileges given to any currencies to substitute for gold, you could then measure the purchasing power of gold itself over the long period, and the

great professor roy jastram did the great work, which i would recommend, called "the golden constant." it shows that the purchasing power of gold, specified as a weight unit, for example, of any national currency, was constant for a period of four centuries. so i do yield to the comments that there were flaws in the implementation, but, when adhered to in its classical, if you will, its true gold standard form, the purchasing power of gold was constant for centuries. >> so, jim, we see a certain amount of financial instability today, but we know also that the history of the united states and britain under the gold standard was also fairly turbulent. i remember reading when britain went back onto the gold standard after the napoleonic war and three years later you had one of the most spectacular crashes in

the city of london and the president of the board of trade said that he thought that england was 8 to 40 hours away from barter. so extreme was the scarcity of money i think that nathan rochester had to bring over gold from france in order to prevent the bank of england from closing up. and we see that time and time again. in 1844, the british introduced the bank charter act, which was supposed to bring an end to boom and bust and bring peace. and four years later it was suspended in yet another crisis, a crisis that led disraeli to give sort of a witty speech of the extension of the act which he compared to the liquefaction of the blood of st. januarius,

an annual miracle that takes place in naples. he said that -- here he is. he says, the archbishop who knights the liquefaction of the blood of st. januarius as the -- the chancellor of the knights. that a wholesome state of the currency had returned. the people resumed their gaiety and cheerfulness. panic disappeared, everyone returns to music and macaroni. in london, everyone returned to business and in both cases the remedy is equally efficacious and equally a hoax. so the point is there, actually, if you bind yourself to a gold standard, you actually sort of -- it's the road to perdition and the only saving of gold standard when it operated in its classical form, it was actually to be suspended when it was working. >> can you repeat the question? >> so it causes panic and crashes. >> edward, i expected so much

more from you. you weren't listening. i said that human beings are not very good with money. panics, crashes, enthusiasms, depressions seem to be wired in us. that is the nature of the beast. the question is whether, under a system of objective monetary value, these irrepressible expressions of human frailty are more dangerous or less dangerous than those we see today under a system of wholly subjective value and of political improvisation. it seems to me -- take the case of -- you're from britain, are you? there was a bank failure of some moment in i think 1867 and then came the baring panic of 1890 and then came the failure a

couple years ago of that mortgage outfit in -- right. right. so britain under the gold standard was largely panic-free. it was indeed a financial system that, as i think they said in mary poppins, was the envy of the world. and no small part of that had to do with i think the objective nature of the currency, but a part of it had to do as well with the ethos of personal responsibility that seemed part and parcel of the financial arrangements. there was no regulation of banking in edwardian england. not a single regulation on books as i understand it and the banks were solvent. today we are positively choked with legislation, dodd/frank 2,300 pages or so, and we still see -- we see the most extraordinary demonstrations of

near-misses and of flat-out misses in our financial system. i think you are hard-pressed to put over the point that the gold standard was the cause of financial disruption. humanity is the cause of financial disruption. the question is, what system best contains it? and under what system and what system is the most equitable and the most given over to establishing prosperity. it seems to me that it's clear. it's not this one. >> so lewis, people have often observed the absurdity of a gold-based currency, that you pay people to go in hot countries to go miles underground to extract some gold and refine it or whatever you do and then put it in the vaults of a bank. but there's another side of absurdity in which the ebb and

flow of the currency, of inflation/deflation, was coincident on the discovery of gold or changes in the refining of gold or the efficiency of the refining of gold. so you had these periods in the 19th century, prosperity and the discovery of gold and then the decline of prosperity and the production wasn't keeping up with the global production. how would you square that? >> would you permit me first to carry on just a little bit about your question to jim. >> about the instability created by -- >> yes. >> yeah. >> implying the advances carried on by central banks, in general. the classical gold standard, which might be used as the example or the model for the true gold standard, that period

between 1879 and 1914 where there were no reserve currencies, the price level in 1914 was exactly at the same level -- that's to say in 1914 -- as it began in 1879. the growth rate in america was unexcelled by any period in american history. so by the test of economic growth and price stability, that 40-year period compared to the period which i mentioned, the 40-year period from 1971 where the purchasing power of the monetary standard fell by 85%, was not quite perfect but really quite astonishing. indeed, at the end of the great classical period of the gold standard, at the onset of the first world war, with the inauguration of the federal reserve of bank, we had