The True Gold Standard (Second Edition)
By all accounts, President Barack Obama will refocus in his 2011 State of the Union address on “jobs and competitiveness.” One must hope he succeeds. But Treasury Secretary Timothy Geithner’s previews strongly suggest that both men are unaware that these two problems are essentially unrelated, and that even with continued economic recovery, Obama won’t propose the two measures that would cut unemployment sharply and start to reverse the decline of U.S. manufacturing: reversing recent extensions of unemployment benefits from 26 to 99 weeks, and negotiating the end of the dollar’s role as chief official reserve currency. Geithner regards the first as “stimulus” and the second as unthinkable.
As the chart below shows, the decline in the U.S. overall net investment position by 30% of GDP almost exactly matched the decline in U.S. net monetary reserves (U.S. foreign official assets minus liabilities). Yet by the latest figures, U.S. net private assets were in surplus by about 7% of GDP. This proves that the U.S. loss of competitiveness is entirely due to financing Federal deficits through foreign monetary authorities. The next successful U.S. president will implement both reforms.
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...
Jul 23, 2014
An article headline in Saturday’s Wall Street Journalread “Rate Talk Heats Up Within The Fed.” As Journalreporters Jon Hilsenrath and Michael Derby...
Oct 05, 2012
Key Monetary Writings
Barry Eichengreen (2011) writes that countries using gold as money “fix its price in domestic-currency terms (in the U.S. case,...
Why the Gold Standard?