The candidates of both parties finally have realized that the defining issue of the 2012 presidential election will be job creation. President Barack Obama leads with a proposal that commentator Larry Kudlow calls, persuasively, a straight jacket rather than a jobs creator. The Wall Street Journalloves the plan put forth by the fast-fading Huntsman and slams the first-tier Romney plan. Meanwhile, a credible key to explosive jobs growth begins to come to the fore: a credible monetary policy prescription for a seriously stable dollar.
A sure signal of a rising policy vector? The Washington Post sends forth a top gunslinger to attack it — “it” being the gold standard and the GOP candidates for considering it. The Washington Post‘s Pulitzer-winning business and economics columnist Steven Pearlstein writes in his Sept. 10 column, “The magical world of voodoo ‘economists’“:
"Republican presidential candidates... wouldn’t mind ... putting the country back on the gold standard.
I realize economics isn’t a science the way biology and physics are sciences, but it’s close enough to one that there are ideas, principles and insights from experience that economists generally agree upon. Listening to the Republicans talk about the economy and economic policy, however, is like entering into an alternative reality." ...
Too facile and too glib, Steve.
Hayek, speaking about the “Pretense of Knowledge” upon his acceptance of the Nobel Prize in Economics (kooky, Steve?), talked about the very “ideas, principles and insights from experience that economists generally agree upon” on which Pearlstein’s confidence depends:
The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences.
In fact, in the case discussed, the very measures which the dominant “macroeconomic” theory has recommended as a remedy for unemployment — namely, the increase of aggregate demand — have become a cause of a very extensive misallocation of resources which is likely to make later large-scale unemployment inevitable. ...
There is something more than a little disorienting at seeing one of the soldiers of the Washington Post, red as its coats have grown, conclude his column with a triumphant embrace of the president whose downfall his predecessors at the Post brought about: “It took a while, but even Richard Nixon came around to declaring himself a Keynesian. Maybe there is still hope for Perry and the gang.”
Hope? This seems to say that it is Pearlstein’s hope that GOP candidates like Rick Perry (and the “gang”) will … measure up to … the personal integrity? … the wonderful stagflation? … of Richard Nixon. Yet … Pearlstein writes that “Listening to the Republicanstalk about economic policy … is like entering into an alternative reality.”
... In the last 100 years, there has been unbridled recourse to fiat currency. This column draws heavily on a benchmark address by Lewis E. Lehrman on “The Federal Reserve and the Dollar” at the 31st Annual Monetary Conference at the Cato Institute, Washington DC.,US (November 14, 2013).
Lehrman quotes Keynes in “Indian Currency and Finance”, to say that whether a central bank holds its reserves in gold or in foreign exchange “is a matter of comparative indifference …India, in her Gold-Exchange Standard… far from being anomalous, is in the forefront of monetary progress …(heading towards) “the ideal currency of the future”. What glory for India!
... 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
The Problem of Say's Law
For several decades, the theories of John Maynard Keynes replaced the classical theory which had dominated policy-making for more than a century until the Great Depression. This brought things full circle, because the classical economists had succeeded the Mercantilists. And the Mercantilists were proto-Keynesian in their contention that, left to itself, the economy has a tendency toward “under-consumption,” which, they argued, must be combated by public spending, combined with measures to increase the money supply.
"Double-entry bookkeeping developed in 14th century Italy, whence the precise, simplified ledger and balance sheet accounting basis for the development of a 'fractional' reserve banking system emerged. In such a banking system a new kind of 'abstract' fiduciary money developed – subject to transfer by checks. They came to be called book entry bank deposits, bank advances, credit money, or checking accounts, sight liabilities, or demand deposits. The banks held bullion or coin reserves against this new credit money. The precious metal reserves were equal to a prudent 'fraction' of the total bank note and deposit money circulation, hence the phrase 'fractional reserve banking system'."
We are pleased to announce the publication of– Money, Markets, and Government: The Next 30 Years.
The articles in Money, Markets, and Government were first presented at the Cato Institute’s 30th Annual Monetary Conference, held on November 15, 2012. The 2008-09 financial crisis and Great Recession have vastly increased the power...
Speaking in Berlin November 21, European Central Bank President Mario Draghi declared: "Let me react towards what is a nationalistic undertone in some of our countries whereby we [are said to] act against the interests of some countries and in defense of our own countries." German members of the European...