The True Gold Standard (Second Edition)
Key Writings: Benko on the Gold Standard
The only plank remaining under notable discussion from either national convention platform of 2012 is the GOP platform’s call for a national monetary commission. Although widely reported as a call for a new “Gold Commission”, the actual text calls for a “commission to investigate possible ways to set a fixed value for the dollar.”
While this plank was caricatured as a sop to the good Dr. Ron Paul, the evidence is persuasive that it was a substantive triumph by the Resolutions Committee editorial team and the co-chairs Rep. Marsha Blackburn and (rumored 2016 presidential aspirant) Virginia governor Bob McDonnell.
Reports about the call for such a commission continued (and continue) to resound around the world. Often commissions are a device for sidetracking — rather than taking on — a proposed reform. This is not necessarily their intention or effect. Some commentators have minimized the potential impact of a national monetary commission. These critics fail fully to appreciate how powerful such a commission can prove … if smartly structured as a neutral forum to tackle what may well be the most important macroeconomic variable required to restore economic growth and job creation: good money.
A long time ago in a galaxy far, far away, America – and the world around it - was rapidly descending into Economic Hell. It was a protracted, confused, process called “the ‘70s.” A number of problems were causing recession, unemployment, and suffering, quantified by “the Misery Index” at twice the depth as today’s. America also was enmeshed in a Cold, yet latently nuclear, War. This held a very real risk of world annihilation.
Two men filled with moral courage, both “deuces,” gave us an era of peace and prosperity. They were deuces, low face value cards in the deck, not jokers, and designated themselves wild. The wild deuce trumps. These two extraordinary men transformed the world.
One of these, a backbencher in the House of Representatives, turned the world economy from misery to affluence. His name was Jack Kemp, a Representative from Buffalo, New York, and former football quarterback. He chaired no committee. He was not part of House leadership. He did not have SuperPAC donors behind him or the support of a MoveOn.org-scale entity.
Kemp had just four assets.
Kemp had a strong intellectual curiosity, one blessedly exempt (he was a physical education major) from having been deformed by the nonsensical economic dogmas then prevailing. He had the humility required to learn from outsiders to the jejune consensus — the pre-Nobel Robert Mundell, Art Laffer, and the odd but brilliant Jude Wanniski. The minds he sought out gave him his Big Idea: lower tax rates and solid monetary policy (which he ultimately concluded meant the classical gold standard).
Are central bankers about to embrace the real world? The events at most central banking conclaves are a total, excruciating, bore. The recent gathering of the Federal Reserve’s tribes at Jackson Hole, however, produced an elegant, compelling, presentation by rising star central banker Andy Haldane. Finally, a youth in the banquet hall declaring that the Emperor has no clothes.
Haldane’s speech, as analyzed by my colleague Charles Kadlec, comes down to this: “The essence of Haldane’s point is the shift from simple, easily understood broad based rules under Basel I to more complex rules is very dubious. This approach made the assessment of risk more opaque. These attempt to manage the risk of the banking system through the superior guidance of complex rules based on black box mathematical algorithms. In addition, these formulae, by their nature, ignore uncertainty by assuming the future can be captured by the past. This combination made the financial panic of 2008 more likely, and the ability of regulators to spot the risk less likely. His major insight is that simple approaches are more effective at managing complex systems than complex approaches in a world of uncertainty.”
One of the latent issues of the 2012 presidential race is a referendum on the Bernanke Fed. If Romney is in, Bernanke is out. Jeffrey Bell, a colleague at American Principles In Action and a high octane analyst, observes, “It is crucial for Romney to invite Mr. Bernanke’s resignation immediately upon his inauguration rather than allowing him to serve out the remaining year of his term. There are substantial lags between changes in monetary policy, their effects on the financial markets, and their even later impact on the real economy. By replacing Bernanke immediately Romney would seize an invaluable opportunity to front-load an economic growth turbocharger, reaping dividends during his first administration….”
Pledging to replace Bernanke immediately during the campaign could dominate a news cycle. And the idea is not far afield. On October 1, in Romney Bashing Bernanke Rejects Adviser Mankiw’s Policy Views , Bloomberg News’s Joshua Zumbrun quietly dropped one of the biggest scoops of 2012:
If Romney wins the presidency, Zumbrun’s scoop could be pivotal for investors. It also provides a crucial glimpse into the prospects for the re-ignition of job creation and American prosperity.
To get rich is glorious.
– Deng Xiaoping
As noted in last week’s column about the rising recognition by authorities in Germany about the virtues of gold, the gold standard is receiving impressive new recognition internationally. The GOP plank calling for a commission to study “possible ways to set a fixed value for the dollar” — with an unmistakable nod to gold — is the most prominent element of the 2012 GOP platform still being heard to “reverberate around the world.” Meanwhile, it continues to gain impressive momentum in the United States.
CNN’s Kevin Voigt writes, in The China Post, “Currencies: Re-evaluating the ghost of gold:”
This is by no means an isolated blip on the economic radar screen of China watchers. As Christopher Potter, president of Northern Border Capital Management, so astutely observed in a column entitled China’s Preparing for the End Game — Are We Paying Attention, published in The Lehrman Institute’s TheGoldStandardNow.org — which Potter advises (and this columnist professionally edits):
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.