The True Gold Standard (Second Edition)
It is difficult to interpret Hensarling’s declaration to hold hearings on “the entirety of their hundred year history and what America has looked like since adopting a fiat currency” as anything but an intention to bring the Commission up for a vote. Hensarling promises to process vast amounts of information. The constraints on a committee hearing, and on a committee staff, cannot do such a huge topic justice. As Rep. Kevin Brady put it in his own remarks at Cato, a “brutally bipartisan” Commission — with Hensarling a Commissioner — is called for.
The terms of the Centennial Monetary Commission designate the Chair of the Committee on Financial Services (or another majority member designated by him) — yes, Mr. Hensarling himself — as one of the Commission’s twelve voting members. Thus, if enacted, the Commission will provide Mr. Hensarling with a distinguished venue from which to deliver on his promise to the Cato officials and audience … and to the Fed itself. …
How much does Cato care about the Commission? The panel following Mr. Hensarling’s was entitled “The Case for A National Monetary Commission and Fundamental Reform.” It was moderated by public intellectual Dr. Judy Shelton, co-director of the Atlas Economic Research Foundation’s Sound Monday Project … and featured Rep. Kevin Brady, chairman of the Joint Economic Committee and prime sponsor of just such a commission, Dr. Gerald P. O’Driscoll Jr, Senior Fellow, Cato Institute, and R. David Ranson, president of Wainwright Economics.
The dollar’s role as the world’s primary reserve currency helps all of us Americans by keeping interest rates low. Foreign countries buy United States Treasury debt not just as an investment, but because dollar-denominated assets are the best way to hold foreign exchange reserves.
This topic is on the minds of American small business owners I learned last week speaking to hundreds of store owners at an Ace Hardware conference. I was surprised by how many people button-holed me to chat on the subject.
China may have prompted some interest in the subject: “. . . it is perhaps a good time for the befuddled world to start considering building a de-Americanized world,” wrote Liu Chang for China’s official news agency Xinhua. With our recent budget crisis, debt ceiling crisis and the 2011 credit rating downgrade, United States finances look shaky. Let’s figure out what the reserve currency status means, why it will continue to a large extent, and how the related issues influence the future.
Alan Meltzer is probably the greatest living disciple of Milton Friedman in relation to Friedman’s views of monetary policy. Meltzer is the monetarist par excellence, author of the definitive series of volumes on the history of the Fed which probably makes him our greatest authority on Federal Reserve history, bar none, not just our greatest monetarist historian of Fed history. He has been a friend and mentor of mine since the mid-90s. His three volume A History of the Federal Reserve System is dense and magisterial, while the men about which he writes tend just towards being dense, though not generally very magisterial. His most recent book, Why Capitalism? is a short and easy ready. We had a wide-ranging discussion, which included a friendly debate about the gold standard.
What is the next direction in the Republican Civil War?
Best guess: Follow the Money.
Americans feel their dollars shrinking. We don’t like it.
And we are groping for a way to stop it.
The left is reported shamelessly cheerleading for a bout of inflation in no less than the lead story of the October 27 Sunday New York Times: “In Fed And Out, Many Now Think Inflation Helps.” The story states, for example, that Harvard economist Kenneth S. Rogoff is championing inflation of 6% a year for “a few years.”
President Obama is nominating Janet Yellen to succeed Ben Bernanke as the next Federal Reserve chairman. The U.S. Senate must be prepared to ask her hard, critical questions and to reject this nomination if satisfactory answers aren’t forthcoming.
Senators will be highly reluctant to do anything other than go through the motions, given the current circus. Republicans in particular won’t want to be accused of “playing politics” with such a critical, sensitive post. But this is the time for statesmanship. The economy’s future depends upon it.