The True Gold Standard (Second Edition)
Key Writings: Benko on the Gold Standard
Once upon a time — September 17th — Reuters published a delightfully preposterous blunderbuss of a blog. It served up a one-sided attack on conservatives.
It did so as part of what it calls The Great Debate. Well, a debate has two sides. Here’s the side Reuters declined to publish.
The very distinguished author of that blog, Prof. Charles Postel, author of The Populist Vision, purported to tell his readers why conservatives spin fairytales about the gold standard. The good professor manages to defame both conservatives and the gold standard. He, subtly, misrepresents even fairy tales. And he did not deliver the goods.
Prof. Postel begins, auspiciously, with two astute observations. “Today,” he writes, “gold is king of conservative economic thinking.” And: “Financial magnate Steve Forbes has turned Forbes magazine into a tool of gold advocacy.” Postel then goes off the rails entirely, turning from a blogger into a fabulist.
We approach, on December 23rd, the centenary of the Federal Reserve System. This anniversary has not gone unnoticed.
The nearly million-strong, militantly Jeffersonian, Campaign for Liberty — the classical liberal counterpart to MoveOn.org — is using the occasion to press for an audit of the Fed as championed in the Senate by Sen. Rand Paul (R-Ky).
Meanwhile, the House of Representatives is calling for a Congressional commission to study the real world effect of various Fed policies over its century-long history. This may be more pragmatical — yet no less incisive. Both previous Congressionally-impelled monetary reforms were impelled by a commission. The Centennial Monetary Commission, HR 1176, sponsored by Joint Economic Committee Chairman Kevin Brady (R-TX), continues to pick up momentum.
The Commission is the right vehicle at the right time. As reported here last month, the Conservative Action Project, and about 40 of its civic leaders, praised this legislation as one if its “critical agenda items” in one of its Memos for the Movement. Full text, with most signatories (including this columnist), reproduced at Conservative Patriot.
The growth gap of the current recovery compared to an average recovery is $1.3 trillion below normal. (Trillion. With a t.)
Current private sector unemployment is nearly 4 million jobs short of an average recovery at this stage. If the labor force participation rate — people who are working or seeking to work — had not collapsed the unemployment rate would be 10.6% rather than 7.4%.
As Joint Economic Committee chairman Rep. Kevin Brady (R-TX) observed: “[S]ince [President Obama’s] taking office only two million more Americans have found a job while 15 ½ million have gone on food stamps. Putting seven people on food stamps for every person that finds a job isn’t the way to strengthen the middle class.”
Such a punk recovery is disheartening, even shocking. Most of all it’s bewildering. Most elements of macroeconomic policy have not changed much (although there has been serious erosion recently) since the days of Reagan through Clinton. That was a policy mix that created millions of good new jobs and sustained a growth rate sufficient to create a federal budget surplus. Still, no growth. Yet while most policy variables have remained constant, one — monetary policy — has changed, and dramatically.
Lewis E. Lehrman, founder and chairman of The Lehrman Institute (with which this columnist has a professional association as editor of the Institute’s web-publication) recently presented to acclaim at the Cato Institute, in Washington, DC, his latest book, Money, Gold and History. The Hayek auditorium was well filled. C-SPAN taped the event for broadcast. Cato livestreamed it (archived and available here).
This was no ordinary event. It may, in retrospect, be seen as the gold standard’s Woodstock. Perhaps a more apt metaphor is the Velvet Underground’s first record. As Brian Eno famously observed, “I was talking to Lou Reed the other day and he said that the first Velvet Underground record sold [only] 30,000 copies in the first five years. … I mean, that record was such an important record for so many people. I think everyone who bought one of those 30,000 copies started a band!” Cato staged what may prove to have been something comparably seminal.
Some of the most eminent voices for monetary reform today — all justly to be considered part of monetary policy’s “Velvet Underground” — participated. Present were Cato’s president John Allison, Cato’s Director of Financial Regulation Studies Mark Calabria, moderator; Cato’s Vice President for Monetary Studies, Prof. James Dorn; Cato senior fellow (and editor of Forbes.com Opinions and RealClearMarkets) John Tamny; Cato senior fellow Alan Reynolds (who, among many other notable accomplishments, coined the term “Supply Side economics”); and Cato’s director of government affairs Laura Odato.
... How eerie, though, that Krugman ridiculed adversaries who anticipated inflation right before the Bureau of Labor Statistics reported that inflation has ticked up, if only for a month, to 0.5% — a worrisome 6% annualized rate. (Core remained at an unworrisome 0.2%, yet still it is a chilling gust….)
This blip does not disprove Krugman’s sanguine stance on inflation. It may yet prove, however, were further proof needed, that the Greeks were right: Nemesis inevitably follows hubris. Prof. Krugman might privately reflect on this … and on his own call, in 2002, that “Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” Terministic screen, anyone?
As the more genteel Chairman Bernanke himself observed on July 10, “Financial stability is also linked to monetary policy, though these links are not yet fully understood.” Yes, not yet fully understood.
BY RALPH J. BENKO:
The 21st Century Gold Standard
Read The 21st Century Gold Standard: For Prosperity, Security, and Liberty by Ralph Benko and Charles Kadlec to learn what the gold standard is, how it works and how a dollar linked to gold would pave the way for a new age of American prosperity.