"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?
... While the Fed's easy-money policies have not produced many jobs, they have produced a persistent, low rate of inflation that is choking the American middle class. Since the asset purchases began five years ago, the average American family has experienced rising prices and stagnant wages. The resulting decline in living standards explains why voters ranked rising prices nearly tied with unemployment as their top economic concern during the 2012 election.
... It is difficult to interpret [Jeb] 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.
Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.
By John D. Mueller
Who Was Jacques Rueff?
..Jacques Rueff is interesting today for a number of reasons. He was a good economic theorist because he was a practitioner of economic policy – and vice versa.
Trained in science and mathematics at the Ecole Polytechnique, Rueff devoted his first theoretical work to showing that the same scientific method applies to “moral” or “social” sciences like economics as to the physical sciences (Des Sciences Physiques aux Sciences Morales, 1922)....
"By means of the lawful stamp of convertibility to gold, a near-worthless paper was suffused with a monetary life of its own. It circulated in place of coins and bullion because it was even more convenient, equally divisible, and above all secured by the substance of real money. Moreover, convertible paper and deposit currencies conserved still further the scarce mineral, labor, and capital resources previously invested in the production and circulation of precious bullion or coins. One sees in the evolution of this extraordinary commercial institution of exchange that money became a unique conservator, and the effective mechanism of growth of a civilization born of scarcity."
This cartoon cleverly presents the tension between the proponents of the classical gold standard and the prairie populists demanding "the free coinage of silver."
Image courtesy of authentichistory.com via BigThink.com
In the mouth of the "silver dog with the golden tail" is a bone, labeled Election.
The 1896 election, which the gold standard...
Unemployment is up in Poland – now 13 percent – and spending is down. But Poland still is doing better than southern neighbors – thanks to the medicine it took when taking economic medicine was unfashionable. The Financial Times’ Jan Cienski wrote: “Growth slowed to only 0.5 per cent in...