Blogs: John D. Mueller
One question I've heard more lately: Now that the gold price is over $1,500 an ounce, shouldn't the U.S. sell its gold reserves—which were mostly acquired from U.S. citizens in 1933 at $20.67 or bought at $35 an ounce under the post-World War II Bretton Woods monetary system?
"I got along with him fine. But Ben Bernanke thinks he's the smartest guy in the room, and wanted everyone to know it," remarked an acquaintance who used to sit in policy meetings with him. I was reminded of the remark when I read that Bernanke would become the first Federal Reserve Chairman to hold press conferences after meetings of the Federal Open Market Committee (FOMC). Bernanke specialized at Princeton in the Great Depression. Yet he ignored Jacques Rueff's contemporaneous explanation. As the chart shows, U.S. stock market speculation rose and fell step for step with foreign dollar reserves invested in New York. Bernanke and the Fed were thus surprised when the crude oil price rocketed to $150 a barrel in 2008 after earlier massive expansion of foreign official dollar reserves, triggering another stock crash-and by the latest round of commodity-led inflation, due this time mostly to the Fed's doubling of its balance sheet after that crash. How will lectures to the press wear, as evidence mounts of policy failures caused by the Federal Reserve ignoring the results of its own and other central banks' actions?
Atlas Foundation Conference on
“Consequences of Progressive Policy on Money and Investment”
Dallas, TX, 1 April 2011
I’m grateful for Alex Chafuen’s invitation—I’ve long admired his work—to take part at the Atlas Foundation conference on the consequences of progressive policy on money and investment, on this panel on the principles of sound money. I’d like to draw on a chapter in my recent book, Redeeming Economics, to explain why both American and world history show that only proper monetary reform—specifically, restoring the international gold standard without official-reserve currencies—will end three longstanding problems which have undermined the United States: first, endlessly expanding federal deficit spending; second, chronic episodes of inflation (or deflation) leading to recession; and third, declining U.S. international competitiveness. I’ll close by explaining why the reform that eluded President Ronald Reagan is now finally doable.
In his memoirs, President Ronald Reagan (Feb. 6, 1911-June 5, 2004) recalled, "To get the spending and tax cuts we wanted through Congress, we needed the help of a substantial number of Democrats in the House as well as the votes of nearly all the Republicans in both houses of Congress."
Despite deep partisan divisions, Reagan won majorities of Republicans, Independents and "Reagan Democrats" by heeding James Madison's observation in Federalist No. 10 that "the most common and durable source of factions is the various and unequal distribution of property." (Madison defined 'property' broadly to include what's now called 'human capital.')
Is Wikileaks founder Julian Assange channeling Don Draper in the TV series Mad Men—the brilliant but ethically challenged publicist with retro lifestyle issues? Assange got the Daily Telegraph breathlessly to report an old June 2009 "confidential" cable from the U.S. London Embassy to the U.S. Treasury, State Department, Beijing and Moscow embassies, headed "LONDON-BASED EXPERTS AGREE THE U.S. DOLLAR WILL MAINTAIN ITS RESERVE STATUS."
The significance was hardly that Treasury Secretary Timothy Geithner deemed HSBC and Deutsche Bank economists' stumble-along-further prognosis a policy endorsement. At most it was that U.S. monetary authorities hadn't previously spelled out to U.S. diplomats that "recent proposals to make the SDR a global reserve currency lacked viability"—which had long been obvious to HSBC's Currency Outlook and James Grant's Interest Rate Observer (and LBMC LLC's Market Watch).
BY JOHN D. MUELLER: