The True Gold Standard (Second Edition)
A cable this morning from Professor John Taylor of Stanford alerts us to the introduction in Congress of the newest piece of legislation offered in respect of monetary reform. It is called the Federal Reserve Accountability and Transparency Act of 2014.” H.R. 5018 would, as Mr. Taylor describes it in his Web log, require the Fed to adopt a “rules-based policy.” The Fed would make the rules. It would then have to submit them to Congress, and be transparent about whether it is following them. The Sun endorses the measure as a step in the right direction.
“I’m a defender of the economic policies that we followed after World War II, that produced the best generation of economic growth that this country has ever experienced. . . . I like the America that my parents prospered in. I think we can restore a lot of that.”
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Those words were uttered by Paul Krugman two years ago when Congressman Ron Paul, in a debate on Bloomberg television, had him on the ropes over inflation. Mr. Krugman had a whole list of things he liked about the 1950s and 1960s. But he forgot to mention one — the gold exchange standard that was set up at Bretton Woods, New Hampshire, in the closing days of World War II and undergirt the growth his parents enjoyed.
Oh, does Mr. Krugman have a blind spot about that. He’s out this morning with a column that runs under the headline “Belief, Facts and Money.” It’s about what Krugman calls “conservative delusions about inflation.” It seems to have been ignited by a cable in the Times from a political scientist, Brendan Nyhan, about how more Republicans and religious people doubt Darwin and ignore climate change.
It may not be exactly what President Obama had in mind when he talked about a pivot to Asia, but feature the latest news in respect of the dollar. According to a dispatch from the London Financial Times, the communist Chinese currency known as the renminbi is “rapidly displacing” the American dollar as a trading currency — not only in Asia and Europe, the FT notes, but also here at home in America. It’s a marker of America’s decline in the age of fiat money.
The value of renminbi payments between America and the rest of the world, the Financial Times reports, rose by 327 percent in April as compared to the year-earlier month. The FT is quoting numbers from the settlement firm known as the Society for Worldwide Interbank Financial Telecommunication. The newspaper quotes an officer of Hongkong and Shanghai Banking Corporation in New York, Debra Lodge, as predicting that the share of Communist China’s trade settled in renminbi will more than double to 30% by the end of next year.
“Worse yet, the number of bankrupt families was climbing. In the early 1980s, when my partners and I first started collecting data, the number of families annually filing for bankruptcy topped a quarter of a million. True, a recession had hobbled the nation’s economy and squeezed a lot of families, but as the 1980s wore on and the economy recovered, the number of bankruptcies unexpectedly doubled. Suddenly, there was a lot of talk about how Americans had lost their sense of right and wrong, how people were buying piles of stuff they didn’t actually need and then running away when the bills came due.”
Those sentences are from Senator Elizabeth Warren’s new memoir, “A Fighting Chance.” It is full of insights into a brilliant woman. She strikes us as smarter, more earnest, better balanced, and less entitled than Secretary Clinton, against whom some reckon she should make an attempt for the Democratic presidential nomination in 2016. Her book makes us wonder whether at some point she could be enlisted in the long struggle for monetary reform.
In terms of public policy, though, we favor honest money. It works out better for more people. And there is a moral dimension to the question of honest money. This was a matter that was understood — and keenly felt — by the Founders of America, who almost to a man (Benjamin Franklin, a printer of paper notes, was a holdout), cringed with humiliation at the thought of fiat paper money. They’d tried it in the revolution, and it had been the one embarrassment of the struggle. They eventually gave us a Constitution that they hoped would bar us from ever making the same mistake.