Robert L. Bartley, editor of the Wall Street Journal, was one of the great "Supply-Siders."
The jacket flap from his 1992 memoir, The Seven Fat years, summarizes:
"Robert L. Bartley's penetrating look at the economic boom of the 1980s, the "seven fat years," when the American economy grew by nearly a third and eighteen million new jobs were created -- directly challenges the now conventional condemnation of that era as simply a time of "greed" and "excess." The recession opening the nineties, says Bartley, was in no way a retribution for our excesses, as is claimed by superstitious moralists, it occurred because the successful economic policies of the 1980s had been abandoned. Bartley argues that understanding what really happened in the "seven fat years," adapting and applying the policies that did work, can produce a sustained global boom lasting into the next [i.e. 21st] century."
The 1979 change to money-supply targets did start to break the inflation. Inflation peaked in January, 1980, with the consumer price index jumping 1.4 percent in a single month, and price of gold peaking at incredible heights, $850 an ounce at the London fixing and trading at $875 on the Comex in New York. This was 25 times the official price when President Nixon closed the gold window less than nine years earlier.
Among the effects of this incredible run-up, above all in 1979, was a rival of interest in gold as a measure of monetary policy and predictor of inflation. We argued in the Journal:
An ounce of gold has undergone no permutation this summer. But the dollar that was worth 1/300th of an ounce of gold six weeks ago is worth only 1/380th of an ounce today. With the dollar declining that spectacularly in its ability to purchase one thing, can a further decline in its ability to purchase other things be far behind?
This drew on discussions not only at Michael 1, but even more intensively at the Lehrman Institute. Lewis Lehrman was a disciple of the late French economist Jacques Rueff, the architect of General de Gaull's economic policies. Rueff had suggested salvaging Bretton Woods by raising the $35 gold price, an idea that drew derision from sophisticates in the United States. Their thinking stopped with the observation that such a change would only help the French, who illogically held large gold reserves, and the two big producers, the South Africans and Russians. In fact, Rueff's suggestion would in all likelihood have saved the world from untold misery.
The world has been through many cycles of monetary disorder driven misery since then.
There is no benefit by perpetuating the cycle of booms and busts that are intrinsic to fiduciary monetary policy.
The classical gold standard, as adhered to by Rueff and defined, with unrivaled precision, by his disciple Lehrman (founder and chairman of the Lehrman Institute) await rediscovery. With the restoration of a modern gold standard, the data strongly suggests, one can have a reasonably expectation that again the American economy can be expected to grow "by nearly a third" (or more) and eighteen million new jobs (or more) can be created.
The apotheosis of the alchemical tradition is the "Great Work" -- Magnum Opus -- of creating the "philosopher's stone."
“Lapis Philosphicus” -- ms 416 by Sir Isaac Newton.
According to the Wikipedia:
The origin of these four phases can be traced at least as far back as the first century. Zosimus of Panopolis wrote that it was known to Maria the Jewess. After the 15th century, many writers tended to compress citrinitas into rubedo and consider only three stages. Other color stages are sometimes mentioned, most notably the cauda pavonis (peacock's tail) in which an array of colors appear.
The magnum opus had a variety of alchemical symbols attached to it. Birds like the raven, swan, and phoenix could be used to represent the progression through the colors. Similar color changes could be seen in the laboratory, where for example, the blackness of rotting, burnt, or fermenting matter would be associated with nigredo.
Various alchemical documents were directly or indirectly used to justify these stages. The Tabula Smaragdina is the oldest documentsaid to provide a "recipe". Others include the Mutus Liber, the twelve keys of Basil Valentine, the emblems of Steffan Michelspacher, and the twelve gates of George Ripley.
In the 17th century, the primitive understanding of physics and chemistry gave plausibility to the search for a process by which to convert base metals into gold. Such great figures as Newton -- father of the modern classical gold standard -- pursued this quest at great length. As noted by Geeky Muse:
Unknown to all but a few, Newton was a practicing alchemist who dabbled in the occult, a tortured, obsessive character who searched for an understanding of the universe by whatever means possible. For centuries some of the world’s greatest geniuses struggled in secret to turn base metals into gold. In a sense they succeeded: in their restless quest, they unlocked some of nature’s greatest secrets. Lawrence Principe was sorting through a collection of old chemistry books at the Chemical Heritage Foundation in Philadelphia when he stumbled upon a forgotten manuscript handwritten by Sir Isaac Newton (I’d love to discover something like that). Any Newton manuscript is of interest, but this one was worth its weight in gold, literally. Principe realized he was looking at evidence of one of the best kept secrets in the history of science. Newton’s manuscript was describing nothing other than a recipe for the Philosopher’s Stone, a legendary substance that reputedly could turn base metals like lead into gold.
Some practices of alchemy were banned in England during Newton’s lifetime, due in part to unscrupulous practitioners who would often promise wealthy benefactors unrealistic results in an attempt to swindle them. The English Crown, also fearing the potential devaluation of gold, should the Philosopher’s Stone actually be discovered, made penalties for alchemy very severe. In some cases the punishment for unsanctioned alchemy would include the public hanging of an offender on a gilded scaffold while adorned with tinsel and other items. It was for this reason, and the potential scrutiny that he feared from his peers within the scientific community, that Newton may have deliberately left his work on alchemical subjects unpublished.
Newton’s manuscripts were also written in the enigmatic language of alchemy. I mean enigmatic in a quite strict sense: it was a riddling language. The best way to look at these metaphors is in the light of riddles. He wrote more than a million unpublished words on alchemy with codes, obscure symbols, and colorful metaphors. His notes contain cryptic references to “Green Lion,” “Neptune’s Trident,” and the “Scepter of Jove.” Most are still mysteries unto themselves. The “menstrual blood of the sordid whore” is decipherable. It means simply the metalline form of antimony. That is the “menstrual blood” that’s extracted from the “sordid whore,” which is the ore of antimony. It’s a coded language, and it’s clear that the alchemists delighted in this code. It’s almost a form of poetry. In fact, lots of alchemists wrote in the form of poetry, quite literally.
In Newton's day, a quest for a way to turn base metals to gold made perfectly good sense. Today the modernist obsession with turning that basest of substances, paper -- or even mere electronic notations -- to something of value is borderline reprehensible.
Alchemy long as been supplanted by chemistry and physics. For the monetary system of the United States -- the Federal Reserve System -- to be based on pre-modern analytical processes is as atavistic as if NASA were engaged in astrology rather than advanced astronomical endeavors.
In an arcane but aptly poetic way one could say that monetary policy concocted by neo-Keynesians and monetarists (whether or not "modern") is written with ink less dignified than ... the "menstrual blood of the sordid whore."
Heritage Network's The Foundry recently published a thoughtful call by Heritage economist Dr. Norbert Michel entitled The Fed's Monetary Policy Matters, Too.
It’s easy to get distracted with news like the guessing game of who will replace Ben Bernanke. But the more important issue is: What is the U.S. doing with its monetary policy and why?
What we’ve learned about monetary policy since the Fed was created is surely more important than any one Fed chairman candidate’s political problems, but the inner workings of monetary policy have never really been much of a party starter. Though understandable, this lack of interest is most troubling, especially in light of recent statements by Bernanke such as that “the maximum level of employment in a given economy is largely determined by nonmonetary factors.”
Although trying to time the economy this way might seem a bit odd, especially given comments like Bernanke’s, it really is the essence of an active monetary policy. Given the Fed’s recent track record in failing to predict a major financial crisis/recession, we should all start to pay a little more attention to monetary policy.
In fact, maybe it’s time for Congress to formally review the Fed’s monetary policy. A great place to start would be Congressman Kevin Brady’s (R–TX) Centennial Monetary Commission Act of 2013 (H.R. 1176). This bipartisan bill has 25 cosponsors and would simply “establish a commission to examine the United States monetary policy, evaluate alternative monetary regimes, and recommend a course for monetary policy going forward.” Maybe Bernanke would like to sit on the commission?
Heritage represents the "gold standard" of the policy analysis institutions. Its perceptive engagement with monetary policy such as that demonstrated by Dr. Michel is an invaluable component in the policy process.
Every former preschooler's memory surely must hold the ditty Pop! goes the weasel!
Courtesy of the Library of Congress
(From this bloggers own past, the tune played by the crank for his Jack in the Box.)
Here is the full, standard, first verse:
Half a pound of tuppenny rice,
Half a pound of treacle.
That’s the way the money goes,
Pop! goes the weasel.
A music sheet acquired by the British Library in 1853 describes a dance, 'Pop! Goes the Weasel', which was, according to the music sheet, 'An Old English Dance, as performed at Her Majesty's & The Nobilities Balls, with the Original Music'. It had a tune very similar to that used today but only the words "Pop! Goes the Weasel". The dance became extremely popular, and featured on stage as well as in dance-halls. By September of the same year the title was being used as a scornful riposte and soon lyrics were added to an already well-known tune.
Perhaps because of the obscure nature of the lyrics there have been many suggestions for what they mean, particularly the phrase "Pop! goes the weasel", including: that it is a tailor's flat iron, a dead weasel, a hatter's tool, a clock reel used for measuring in spinning, a piece of silver plate, or that 'weasel and stoat' is Cockney rhyming slang for "coat", which is "popped" or pawned to visit, or after visiting, the Eagle pub.
Whatever obscurity attaches to "the weasel" ... it seems apt enough when conjoined with "That's the way the money goes" to describe what's happened to the value of the dollar since the abandonment of the classical gold standard.
Perhaps June 20 should be celebrated as "World Good Money Day" ...
... to help anchor certain facts in the culture.
Scene from the Berlin Airlift courtesy USAF Historical Research Agency
As summarized in an exceptionally lucid article, the German Economic Miracle, by economist (and editor) David R. Henderson -- a research fellow with Stanford University’s Hoover Institution and an associate professor of economics at the Naval Postgraduate School in Monterey, California -- and published in the estimable Library of Economics and Liberty:
Journalist Edwin Hartrich tells the following story about Erhard and Clay. In July 1948, after Erhard, on his own initiative, abolished rationing of food and ended all price controls, Clay confronted him:
Clay: “Herr Erhard, my advisers tell me what you have done is a terrible mistake. What do you say to that?”
Erhard: “Herr General, pay no attention to them! My advisers tell me the same thing.”
Hartrich also tells of Erhard’s confrontation with a U.S. Army colonel the same month:
Colonel: “How dare you relax our rationing system, when there is a widespread food shortage?”
Erhard: “But, Herr Oberst. I have not relaxed rationing; I have abolished it! Henceforth, the only rationing ticket the people will need will be the deutschemark. And they will work hard to get these deutschemarks, just wait and see.”
Of course, Erhard’s prediction was on target.
The effect on the West German economy was electric. Wallich wrote: “The spirit of the country changed overnight. The gray, hungry, dead-looking figures wandering about the streets in their everlasting search for food came to life”
Shops on Monday, June 21, were filled with goods as people realized that the money they sold them for would be worth much more than the old money.
Many conventional economists today are offering counsels of despair, calling stagnation "the new normal." The power of monetary reform, however, has been demonstrated many times -- yet rarely as vividly as in the German Economic Miracle. Germany was in far, far worse shape than is America today. And bombed out Germany went on -- with a monetary reform roundly condemned by the experts of its day -- to become a wonder of the world.
In all began on June 20, 1948.
Let's celebrate it, annually, as World Good Money Day.