Will Stanley Fischer succeed Ben Bernanke?

Monetary policy has become a "rule of men and not of law."  There is no "golden rule" that, classically and, according to then-governor Ben Bernanke, in a 2004 speech at Washington and Lee University, worked well:

“The gold standard appeared to be highly successful from about 1870 to the beginning of World War I in 1914. During the so-called ‘classical gold standard period,’ international trade and capital flows expanded markedly, and central banks experienced relatively few problems ensuring that their currencies retained their legal value.”

Now that the Federal Reserve bases monetary policy on the discretion of elite civil servants the identity of the Chairman of the Federal Reserve takes on a certain kind of transcendent importance.  Hence it was of keen interest to see the Washington Post's "Wonkblog," by Dylan Matthews, devote itself to an adulatory profile of Prof. Stanley Fischer, Stan Fischer saved Israel's economy.  Can he save America's?


Stanley Fischer, photo courtesy of the Wikipedia


Every August, central bankers from across the globe, who collectively pull the levers of the world economy, descend on Grand Teton National Park in Wyoming. They enjoy a symposium of big economic ideas and strenuous afternoon hikes. At one of their dinners a few years ago, Federal Reserve Chairman Ben S. Bernanke looked around at some fellow titans of finance.

“Do you know what everyone at this table has in common?” he mused. “They all had Stan Fischer as their thesis adviser.”

Stanley Fischer, who this month announced that he will step down as governor of the Bank of Israel, is one of the most accomplished economists alive. Any one of his past jobs would be a crowning achievement in an economist’s career.

As a professor at MIT — arguably the best economics department in the world — he helped found a school of economic thought that has come to dominate departments across the country. He also advised an all-star crew of grad students who went on top jobs in the policy world, including Bernanke, European Central Bank President Mario Draghi and former chief White House economist Greg Mankiw.

As the No. 2 official at the International Monetary Fund, he helped contain the Asian economic crisis of 1998. As a vice chairman at Citigroup, he ran all work for public-sector clients at what was at the time the world’s largest bank.

And in 2005, Israeli Prime Minister Ariel Sharon and Finance Minister Benjamin Netanyahu picked him to lead the central bank of a country he had previously only visited. No matter — Fischer’s results were more than enough to assuage any doubts. No Western country weathered the 2008-09 financial crisis better. For only one quarter — the second of 2009 — did the Israeli economy shrink, by a puny annual rate of 0.2 percent. That same period, the U.S. economy shrank by an annual rate of 4.6 percent. Many countries, including Britain and Germany, fared even worse. While they were languishing, by September 2009 Fischer was raising interest rates, all but declaring the recession defeated.

This blogger naturally is respectful of Governor Fischer's extraordinary intellect and impressive track record.  Notwithstanding, however, his sterling credentials, America and the world have been disappointed before, and not rarely.   Reposing the people's trust in even the most distinguished and civic spirited central bankers who must operate according to discretion rather than a clear, organic, and sensible rule -- such as that conveyed by defining currencies as a fixed weight of gold -- repeatedly has not worked out very well.  

As Prof. Robert Mundell wrote in his Nobel Prize in Economics acceptance speech, in 1999:

The twentieth century began with a highly efficient international monetary system that was destroyed in World War I, and its bungled recreation in the inter-war period brought on the great depression, Hitler, and World War II>  The new arrangements that succeeded it depended more on the dollar policies of the Federal Reserve System than on the discipline of gold itself.  When the link to gold was finally severed, the Federal Reserve System was implicated in the greatest inflation the United States has yet known, at least since the days of the Revolutionary War.  Even so, as the century ends, a relearning process has created an entirely new framework for capturing some of the advantages of the system with which the century began.

Rather than asking the American people, once again, to trust the experts it would be more prudent to consider "capturing some of the advantages of the system with which the century began."  Or even, perhaps, capturing all of them by restoring, and placing someone of the superb quality of Prof. Fischer in charge of administering, the classical international gold standard.

Vinaora Nivo SliderVinaora Nivo SliderVinaora Nivo SliderVinaora Nivo Slider

An Exclusive Interview With Lewis E. Lehrman

June 22, 2015

An Exclusive Interview with Lewis E. Lehrman, Part Twenty-one


Signs Of The Gold Standard Emerging From Great Britain?

by Ralph Benko

... Given Kwarteng’s current and, likely, future importance to the world monetary discourse it really would be invaluable were he to master the arguments of Jacques Rueff, and of Lewis Lehrman, as well as those of Triffin (who shared the same diagnosis while offering a different prescription).

Read More



Exclusive interview with Prof. Lawrence White, Part 3

Ralph J. Benko  |  Oct 20, 2014
Lawrence H. White is an  economics professor at George Mason University who teaches graduate level monetary theory and policy. Lawrence White As described by the Wikipedia, "White earned his BA at Harvard University (1977) and PhD at the University of California at Los Angeles (1982). Before his current role at George Mason...
The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures.  Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
An article headline in Saturday’s Wall Street Journalread “Rate Talk Heats Up Within The Fed.” As Journalreporters Jon Hilsenrath and Michael Derby...
Jan 26, 2012
Key Monetary Writings
Judy Shelton

The Wrong Way to Double Exports

Beware of President Obama's call for a doubling of U.S. exports over the next five years as a way...

Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

In Memoriam
Professor Jacques Rueff

Now Available on Amazon and from The Lehrman Institute

Gold Standard 3-Pack

Three Gold Standard Titles for One Low Price. Only from The Lehrman Institute Store.

Buy from
The Lehrman Institute