These days Japanese consumers seem to be trying to emulate the virtuous Ryokan. Consumers have sobered up and tightened their purse strings after a half-decade spending binge fueled by a roaring economy and soaring financial markets.42
Ryōkan (1738–1831) is remembered in many stories for his kindness and generosity to the less fortunate. He let mosquitoes and lice bite him out of sympathy for insects, and he once offered his clothes to a would-be thief who discovered he had nothing to steal.43 Most Japanese did not go so far, but the new virtue lasted throughout the lost decades in Japan.
“American Dream” and Analogous Narratives Displace the Frugality Narrative
James Truslow Adams coined the phrase American Dream in the first edition of his New York Times best-selling book The Epic of America (1931). The term is virtually never found on ProQuest News & Newspapers before 1931, except for mentions of a bedspring that promised good sleep, marketed in 1929 and 1930 as “The American Dream.” As Figure 11.1 shows, Adams’s American Dream went viral, vastly outpacing similar terms going back centuries, such as American character, American principles, and American credo. The “American Dream” was a long slow epidemic that is still growing today, almost a century after Adams coined the term. Adams, who died in 1949, saw only the very beginning of the epidemic.
Adams defined the American Dream as follows:
The American dream, that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement … It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.44
Some might say that Adams’s account is a somewhat bland description of any country’s dream, not a fiery manifesto that we’d expect to go viral. Indeed, it sounds similar to the China Dream, espoused by Chinese premier Xi Jinping; to the French Dream, espoused by former French president François Hollande; and to the Canadian “National Dream,” all modeled after Adams. But there must have been something appealing and original about this idea that made it slowly and consistently contagious.
The phrase American Dream has a ring of truth to it as a statement of American values. The United States is a proud country that has no aristocracy, allows no titles or royalty, announces in its Declaration of Independence that “all men are created equal,” and allows free enterprise to proceed with little government interference. However, it is also a country that permitted slavery until 1863. Long before Adams defined the American Dream in 1931, slavery was seen as an abomination and an embarrassment inconsistent with the nation’s stated commitment to equality. And American blacks have not received equal treatment even long after the abolition of slavery. But by coupling “American” with “Dream,” the phrase might have defined a trend toward a better social order “in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable.” That’s what a dream is: the sense of an ideal future, a deep-seated and fervently desired wish that is partly fulfilled today and might become completely fulfilled in the future. When Adams says that the American Dream “is not a dream of motor cars and high wages merely,” he seems to assert that the American Dream is in part a dream of these material things. Of course people want to provide for their family and they want a good standard of living, but they want everyone to have a chance to achieve the same goals.
FIGURE 11.1. Frequency of Appearance of American Dream in Books, 1800–2008, and News, 1800–2016
The epidemic had hardly begun during the lifetime of its author, James Truslow Adams. Sources: Google Ngrams, no smoothing, and author’s calculations from ProQuest News & Newspapers.
The original discussion of the American Dream in the 1930s, before the term went viral, was primarily intellectual. For example, George O’Neil’s 1933 intellectual play American Dream examined whether American society truly embodied this dream. Later, in 1960, another intellectual play by Edward Albee, similarly titled The American Dream, was more critical of consumerism. The phrase American Dream cropped up repeatedly in honest discussions about America. Some intellectuals who were critical of the popular notions of economic success in the United States used the term ironically, but other intellectuals thought it measured some real aspect of American character.
For example, civil rights leader Martin Luther King, Jr., used the phrase in his legendary “I Have a Dream” speech, which he delivered during the civil rights march on Washington, DC, to a large crowd stretching between the Washington Monument and the Lincoln Memorial. In that speech on August 28, 1963, he looked confidently forward to a day when “this nation will rise up, live out the true meaning of its creed: We hold these truths to be self-evident, that all men are created equal.”
Congress made King’s birthday a US national holiday in 1983. When President Ronald Reagan signed the Act of Congress into law, he referred to the “I Have a Dream” speech. Later that year, King’s widow, Coretta Scott King, said, “Help us to make Martin’s dream—the American Dream—a reality.”45 We see how seemingly small and unpredictable moments in history—the publication of Adams’s book and a single speech by King—can develop gradually into the backbone of a powerful narrative that continues to grow by contagion for decades afterward.
The celebrity aspect of narratives, so frequently discussed in these pages, is at work in the American Dream narrative. Martin Luther King, Jr., an inspirational figure who was assassinated as he fought for the American Dream, made for a far better narrative, and he pushed aside James Truslow Adams in the American collective consciousness, giving the American Dream narrative the human interest it needed to achieve enormous contagion. In fact, Adams wasn’t enough of a celebrity to have his name attached to the narrative. Less than one-tenth of 1% of ProQuest News & Newspapers hits for American Dream since King’s “I Have a Dream” speech mention James Truslow Adams, but 3% mention Martin Luther King, Jr.
Ultimately, the generally accepted narrative of the American Dream includes a wish for prosperity for everyone, framing it in a way that makes it seem not commercial or selfish. It turns upside down Thorstein Veblen’s idea of conspicuous consumption undertaken solely to prove one’s superiority. As a result, the American Dream became extremely useful in pitches for consumer products that encourage potential purchasers to feel better about their purchases, such as a new home or a second car. In fact, ProQuest News & Newspapers shows that more than half the use of the phrase American Dream has occurred in advertisements rather than articles.
The Mutating American Dream: Homeownership
In the 1930s and 1940s, most of the ads using the phrase American Dream promoted intellectual products: books, plays, sermons. But as time wore on, and as the epidemic strengthened, the phrase took on a different dimension. The American Dream turned into owning a home, with the underlying sense that owning a home implies patriotism and commitment to the community. While advertisements have used the phrase less in recent decades, they continue the presumption that the American Dream justifies generous expenditures on homeownership. Over two-thirds of ProQuest News & Newspapers hits for American Dream since 1931 also include the word house or home.
The American Dream has been used to justify government actions supporting the housing bubble that eventually collapsed during the world financial crisis of 2007–9. In 2003, near the height of the bubble, Fannie Mae, the government-sponsored mortgage giant, adopted the following slogan for its advertisements: “As the American Dream Goes, So Do We.” That same year, the US Congress passed, and President George W. Bush signed, the American Dream Downpayment Assistance Act, which subsidized home down payments. Since 1973, 265 bills and resolutions introduced in the US Congress have included the words “American Dream.”
President George W. Bush heavily used the slogan “Owne
rship Society” during his 2004 reelection campaign. The slogan was a variation on the American Dream theme; Bush was calling attention to a society that respects ownership and in which people “take ownership”—that is, take responsibility for themselves. He said in 2002, “Right here in America if you own your own home, you’re realizing the American Dream.” He spoke of the good feelings homeownership lent: “All you’ve got to do is shake their hand and listen to their stories and watch the pride that they exhibit when they show you the kitchen and the stairs.”46
Controlled experiments have shown that marketing of consumer products may be enhanced by appeals to patriotism.47 By attaching the term American Dream to moral rectitude and to patriotism, this narrative epidemic probably raised the homeownership rate in the United States, as well as stimulating business in general.
The results have been both positive and negative. On the one hand, the American Dream narrative justifies people’s desire to purchase expensive cars, extravagant homes, and other lavish consumer products and services. The narrative has probably boosted the real estate sector, both directly through consumer demand and indirectly via government support, or expected future government support, should anything go wrong in that market. On the other hand, the American Dream as embodied in the desire for homeownership played a strong role in the US housing boom before the 2007–9 world financial crisis and thus added to the severity of the crisis.
Today, the American Dream narrative justifies conspicuous consumption and the ownership of a pretentious house, in stark contradiction to the frugality narrative that was popular during the Great Depression. The American Dream narrative offers a justification for feeling proud of one’s accomplishments, a sense of moral rectitude. The gold standard narrative, to which we turn in the next chapter, has a similar moral theme.
Chapter 12
The Gold Standard versus Bimetallism
Especially prominent among perennial economic narratives, the gold standard narrative dating back over a century remains somewhat active today. For example, President Donald Trump has repeatedly advocated a return to the gold standard in the United States. In a 2017 interview, he said:
We used to have a very, very solid country because it was based on a gold standard.… Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.1
Stated simply, bringing back a gold standard means defining the nation’s currency in terms of a fixed unchanging amount of gold, and the government promising to redeem currency in gold or to do the reverse, on demand, so that the currency is perfectly interchangeable with gold. The world solidly abandoned the gold standard in 1971. Since then, countries have used fiat money—that is, money not backed by anything.
Central banks (with the notable exception of the Bank of Canada)2 still own gold, though gold no longer backs their currency. According to the World Gold Council, central banks and finance ministries around the world own a total of 33,000 metric tons of gold, worth approximately $1.4 trillion US dollars.3 But gold doesn’t back the currency, so why do central banks hold it?
US Congressman Ron Paul asked the US chairman of the Federal Reserve, Ben Bernanke, why the Fed holds gold and not diamonds. Bernanke gave a candid answer: “Well it’s tradition—long-term tradition.”4 Bernanke was apparently referring to narratives and to the idea that central banks are apparently worried about stories that upset the public if a central bank rids itself of its gold holdings. Some people even think the United States is still on the gold standard, or at least have no clarity that it is not.
We shall see in this chapter that narratives about gold and money have a peculiar emotional tone, analogous to the emotions we see in cryptocurrency narratives today. There is a mystique about gold and money and innovations, and a mystique about pretentious theories on these topics. This mystique is difficult to explain.
The stories of gold and the gold standard are not simple. In fact, in history the gold standard has long been associated with prolonged deflation and other economic problems. In addition, the narratives about the gold standard have historically been sharply divisive and acrimonious, much like the cryptocurrency narratives in recent years. Let us look first at this long tradition, at the nineteenth-century excitement about gold, and see how it persists today and how it has recurred in mutated form with the cryptocurrencies.
The Crime of 1873 and the Emotional Divide
The United States effectively went onto the gold standard, attaching the US dollar exclusively to gold, with the Coinage Act of 1873 signed by President Ulysses S. Grant. (The Gold Standard Act of 1900 further clarified the standard.) Prior to 1873, the United States had been under a bimetallic standard (in effect, without calling it that), and the Coinage Act of 1834 specified the ratio of silver to gold at sixteen to one. The 1873 move was part of an international standardization of currencies around the gold standard.5 The 1873 act was followed in the next two decades by persistent deflation (that is, falling consumer prices). Some observers labeled the 1873 Coinage Act “a crime” because the deflation impoverished debtors, especially farmers who bought their farms with a mortgage, by lowering the price at which they could sell their crops and raising the real value of their debts. Also, people who’d made major purchases were dismayed to see that they could have bought them for less if only they’d waited. The talk at that time, notably by farmers, encouraged moral outrage and public support for a return to bimetallism.
The bimetallism proposal, which was discussed internationally in the late nineteenth century and which gained enormous traction in the United States, advocated a return to having two metals backing the currency, enabling people who owed money denominated in dollars in effect to choose which metal to pay in. Under the gold standard as defined in the United States, a contract specifying payment of one dollar was a contract to deliver 1/20.67 of an ounce of gold. Under a bimetallic standard with a 16-to-1 ratio, the contract would have been interpreted as an agreement to deliver either this amount of gold or 16 times as many ounces of silver. Advocates of bimetallism became known as “Silverites,” almost as if they were a political party, though in the United States in fact they were allied with the Democratic Party. The Silverites never succeeded in moving the United States to bimetallism, but by the 1890s the Silverites’ proposal suddenly gained popularity.
However, by the 1890s the actual market prices of the two metals in world commerce implied a ratio of around 30 to 1. Thus the bimetallism proposal would have allowed debtors to cut their debts roughly in half by choosing to repay them in silver rather than gold. In effect, the result would have been a default on about half the value of all debts denominated in US dollars. Supporters of the gold standard therefore thought of themselves as upholding truth and honesty.
As Figure 12.1 shows, the term gold standard has not appeared very often in English-language books, newspapers, or magazines except in two decades: the 1890s and the 1930s. (There is also an uptrend in use of the term after the year 2000, but with “the gold standard” usually meaning just “the best.”) Those two decades, the 1890s and the 1930s, were precisely the decades of the two biggest US depressions as measured by the unemployment rate. Because the gold standard was talked about very much during those depressions, we ought to consider how the gold standard narratives relate to the potential for severe depression. In both cases, the 1890s and the 1930s, the talk was of debauching the gold standard, allowing debt to be paid with less gold, and complaining that ending the gold standard meant ending something traditional and honest. People seem to have a natural respect for ideas that they perceive as coming from the wisdom of the past and that reflect true or important values.
FIGURE 12.1. Frequency of Appearance of Gold Standard in Books, 1850–2008, and News, 1850–2019
The term has had two separate epidemics decades apart, both associated with major depressions. Sources: Google Ngrams, no smoothing, and author’s calculations using data from ProQuest
News & Newspapers.
The term devaluation entered the English language in 1914, referring to the decline in a currency’s value, and it started to become popular in the 1930s. There was no such word in the 1890s, during the first severe depression. However, that decade saw a resurgence of Silverite narratives. Their opponents in the 1890s thought that bimetallism was a dishonest attempt to avoid national shame for default.
In April 1895, the Atlanta Constitution reported on the idea of returning to bimetallism at 16 to 1, an idea that had started going viral:
Representative Hepburn is in town, having spent a month or so traveling in Iowa since the adjournment of congress. He says that he has visited every county in his district, and various other sections of the state, and has found that everybody is crazy on the silver question. It is the only topic they will talk about. Whenever two men get together, whether it is at the postoffice or at the street corner, in the railway station, or the corner grocery, or while riding on the cars, they discuss nothing else, and the sentiment is almost unanimous in both parties that the United States government should immediately declare in favor of the free and unlimited coinage of silver regardless of the policy of the European nations.6
Belief in bimetallism took on strong geographic and social-class dimensions. Eastern intellectuals favored the gold standard, while westerners, who were more likely to be farmers, favored bimetallism. Supporters of the gold standard tended to appreciate symphony performances, while Silverites liked to watch boxing matches. By some accounts, Silverites tended to be hypermasculine and warmongering. In 1897 the New York Times asked, “Is there something in the silver creed that brings out the natural savagery of its sectaries and makes them delight in the barbarous principles and rough ways of early man?”7
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