Sep 252012
 

In the article below, published by the American Spectator, Lewis Lehrman makes the case for a modernized gold standard.  A true gold standard:

  •  provides long-run price stability;
  • generates “network effects” which integrate and contribute to the growth rates of competitive trading nations, just as it did during the Industrial Revolution;
  • a “just social order” which favors savings over speculation, and rising living standards for all, not just the favored few;
  • restrains abuse of power by those who would expand the power of government through excessive debt and debasement of the currency;
  • promotes “dis-hoarding” and favors productive investment
  • rebalances world trade.

He concludes by outlining 5 concrete steps “to get from here to there.”

++++++

A Road to Prosperity

by Lewis E. Lehrman

Gold, a fundamental, metallic element of the earth’s constitution, exhibits unique properties that enabled it, during two millennia of market testing, to emerge as a universally accepted store of value and medium of exchange, not least because it could sustain purchasing power over the long run against a standard assortment of goods and services. Rarely considered in monetary debates, these natural properties of gold caused it to prevail as a stable monetary standard, the most marketable means by which trading peoples worldwide could make trustworthy direct and indirect exchanges for all other articles of wealth.

The preference of tribal cultures, as well as ancient and modern civilizations, to use gold as money was no mere accident of history. Nor has this natural, historical, and global preference for gold as a store of value and standard of measure been easily purged by academic theory and government fiat.

Gold, by its intrinsic nature, is durable, homogenous, fungible, imperishable, indestructible, and malleable. It has a relatively low melting point, facilitating coined money. It is portable and can be readily transported from place to place. Gold money can be safely stored at very low cost, and then exchanged for monetary certificates, bank deposits, and notes—convertible bills of exchange that efficiently extended the gold standard worldwide.

Read rest of article

 

by Ralph Benko

This article was published originally by Forbes.com on June 25, 2012

President Obama’s re-election strategy will be predicated on blaming the economic stagnation on George W. Bush, and, thus, the GOP, my colleagues Frank Cannon and Jeff Bell persuasively argued recently in The Weekly Standard.  Cannon and Bell are right.  And, that said, Bush’s fiscal policies were not the culprit.

Bush was mugged by the Fed. The Fed produced a Hurricane Katrina of louche money. The Fed produced the housing bubble, which, popping, caused the panic of ‘08.  The Meltdown developed on Bush’s watch.  More voters therefore still blame Bush than Obama for the lousy economy. Obama is exploiting that at the heart of his campaign strategy.  But Obama’s strategy of blaming Bush can be forced to backfire.

Flipping the Obama campaign on its back requires that the Romney campaign exploit this vulnerability:  Obama has embraced the same Fed whose policies caused the catastrophe. Romney can use this to turn Obama’s line of “Blame Bush” attack back on Obama.  But he can do so only if his political team shows the same degree of savvy as does his economic team.

Romney’s economic team is led by R. Glenn Hubbard.  Hubbard, although having done a stint as chairman of the council of economic advisers under Bush, gets it.  He unflinchingly attacks the Fed policies that torpedoed the economy.  If Romney’s political strategists will pivot and open fire on the real culprit, defective central planning by the central bank, Obama’s main campaign thrust is parried and can become fatal to the president’s reelection hopes.

Cannon and Bell observe that “Obama strategists would treat Romney’s selection as a vice presidential running mate of anyone who could be portrayed as a Bush-era economic policymaker (such as Ohio senator Rob Portman) as a gift from the political gods.”  This is emphatically true applied to “a Bush-era economic policymaker” who misunderestimates how critical monetary policy is in creating an economic climate of job growth and prosperity — or, as now, despair.

The GOP seems to have gotten it through its thick head that tax increases — like the preprogrammed “Taxmaggedon” threatening America — are terrible for the economy and job creation.  Most voters clearly understand this.  But good tax policy alone is not enough.  Good money — keeping the dollar healthy — was as much part of the foundation of  the Reaganomics magic as was cutting marginal tax rates.  Most voters understand this too.

Reagan worked his voodoo to achieve prosperity through two key variables: tax rate reduction and an end to the flood of cheap Carter regime dollars.  (Clinton held on to the essence of these and upped the ante with trade liberalization and, under pressure from Gingrich,  welfare reform.)  Lower tax rates andgood money unleashed a tsunami of worldwide economic growth.  The crucial “good money” piece of Reagan’s formula often seems to have been lost on much of Washington, even on the establishment GOP who should have internalized the core of Reaganomics by now.

There’s been a recent sighting of the Republican Memory Hole, emanating, alas, from that very Rob Portman against whom Cannon and Bell characterize as “a gift from the political gods” for Obama.  The Supply Side, the Tea Party, the Conservative, and the Libertarian bases of the GOP were stunned earlier this month by Portman’s public attaboy for  President Obama’s job-killing monetary policy.

Portman is widely considered the frontrunner pick for Vice President so this was not the usually inconsequential Senatorial blather.  If he is selected without having retracted this it will be much harder for Romney to credibly undercut the Obama strategy.  In a June 13 op-ed in Politico Portman wrote to contrast the feeble Obama recovery with the strong Reagan recovery in We Can Do Better on Economy.  Buried 12 paragraphs in Sen. Portman observes:

Remarkably, Reagan’s recovery took place even as the Federal Reserve was strongly contracting the money supply. Obama’s policies have failed despite the Federal Reserve loosening the money supply. Reagan’s recovery took place even as the Federal Reserve was strongly contracting the money supply?  Obama’s policies have failed despite the Federal Reserve loosening the money supply?

Even as?  Despite?  This seems to mean that Mr. Portman considers the Reagan-era stabilization of the dollar by the Volcker Fed contractionary and the Obama-era flood of dollars by the Bernanke Fed … stimulative.  Let us hope this was merely an infelicitous choice of words.  But… Portman served as Bush’s Director of the Office of Management and Budget.  By training and disposition his proficiencies are … management — meaning regulations— and budget. Not money when money is crucial.

Portman shows he has assimilated half of the Reagan lesson by calling for “pro-growth tax reform by lowering marginal tax rates and pay for it by closing loopholes that only complicate the Tax Code and slow growth.”  And Portman calls, uncontroversially, for “regulatory relief to small businesses, open up more export markets … and encourage domestic energy production to create jobs and lower prices. … (and to) rein in runaway spending ….”

Good fiscal and regulatory policy are necessary for growth.  But by themselves they are insufficient. Portman concludes his claim that the GOP can do better by saying  “These pro-growth policies would unshackle the economy and encourage hiring. They would bring long-term sustainability to the budget and new revenues through growth.  There is no reason the economy cannot return to the higher growth that occurred in past recoveries. We have the blueprint; we just need the will.”

Yes, Senator, we have Reagan’s blueprint for economic growth:  good monetary, as well as good fiscal, policy.  In the party’s Congressional wing, Joint Economic Committee Vice Chairman Kevin Brady, joined by, now, 45 House co-sponsors and your colleague Sen. Mike Lee call for passage of the “Sound Dollar Act” as the first important step towards better monetary policy. Perhaps Sen. Portman’s implication that current Fed policy is stimulative was merely a rhetorical lapse. If so it is one from which he can quickly recoup by consulting with good money GOP champions.

At the party base, Libertarians, led by Ron Paul, enthusiastically call for recognizing gold as money.  Tea Partiers, led by Herman Cain, demand a 21st Century Gold Standard.  Supply Siders led by Steve Forbes, Lew Lehrman and Sean Fieler (institutes who the latter two chair this columnist professionally advises) also call for restoring the gold standard.   Conservatives, led by Reagan’s counselor and attorney general Edwin Meese, call for monetary reform in their 2012 consensus agenda.  In academe, elite economists such as Prof. Taylor call for, well, predominantly the Taylor Rule.

There’s a discussion under way within the GOP as to whether the “Taylor Rule” or the “Golden Rule” is the better choice.  But there is a firm consensus within the party — one shared, according to Rasmussen , by the voters — that good money is essential to job growth and prosperity.

Romney’s economic team understands the need for monetary reform. Led by Hubbard, Team Romney is on record demanding just that.  Romney’s prospects may well depend, now, upon whether Romney’s political team will grasp how Obama’s effort to attach blame to the GOP for the lousy economy can be turned back on Obama himself by an attack on Obama’s support for louche Fed policy.

 

by Charles Kadlec

This article was published on June 11 by Forbes.com

Monetary policy in the U.S. has tightened, inadvertently, but with potentially dire consequences for the economy, employment and the stock market.  The source of tight money is a failure of the Fed to act in the face of a surge in the demand for dollars as individuals and corporations shift money balances out of the euro and into the dollar.

This episode is but the latest example of the cost of a monetary system that relies on the “best judgments” of a dozen voting members of the Federal Open Market Committee (FOMC) to set monetary policy. Without concrete rules and procedures that would permit monetary policy to adjust to the inevitable fluctuations in the demand for dollars as they occur, those in charge must wait for evidence in the real economy of either too much for too little money before they can arrive at a judgment as to what action to take next.  By then, the Fed is relegated to damage control from its own inaction.  The consequence is a more cyclical economy prone to financial crises.

The preponderance of evidence now points to a sudden and harsh reversal of inflationary pressures evident just a year ago, whipsawing commodity producers and adding monetary uncertainty to the existing impediments to economic growth in the U.S. and around the world.

Last June, the Fed’s second round of “quantitative easing” (QE2) was coming to an end. Over the prior eight months, the Fed had purchased $600 billion in assets, increasing the monetary base or supply of money by 33% above its year earlier level.

Such an increase in the supply of dollars in the face of steady demand led to a fall in the value of the dollar.  Over those same twelve months, commodity prices as measured by the CRB spot commodities index were up 34%. Metals prices were up 37%, oil up 28% and foodstuffs up an incredible 45%.

But, when QE2 stopped, the Fed virtually stopped growing the monetary base. As a consequence, the year-over-year increases began to fall, hitting 29% at the end of December.  By March, the 12-month change had dropped to 16%. By the end of May, the monetary base was virtually unchanged from its June 2011 level.

A zero increase in the supply of money may have been fine had not the European financial crisis intensified over the same period.  As confidence in the sovereign debt of spread from Greece to Spain, Portugal and Italy fell, so did trust in the stability of banks stuffed with government bonds and the stability of the euro itself.   The latest concerns over Greece and now Spanish banks has intensified the flight to the dollar.

If you hold the quantity of a good constant in the face of rising demand, the price of that good goes up.  The same is true for the value of a currency.  In the past year, the value of the dollar has gone up – 16% against the euro. The year/year change in the CRB spot commodity index is now minus 14%.  The dollar price of metals and foodstuffs have fallen 17% and oil prices have dropped 15% to under $85 a barrel.

Apologists for the Fed will blame the decline in prices on a weak economy.  But, that is exactly backwards.  A swing from a 34% increase in prices to a 14% decline in prices is the epitome of price instability. That kind of instability increases uncertainty, and therefore makes it a lot harder to do business.  When monetary instability makes it harder to do business, no surprise, the economy slows and job creation comes dangerously close to a halt.

The root problem is the Fed has no operating procedure to enable a timely response to rapidly changing demand for dollars.  Instead, a dozen men and women on the FOMC meet every six weeks, review a hodgepodge of data on inflation and economic output, almost all of which is at least a month old and subject to revision, and then use their best judgment to set monetary policy. Such an approach provides no reliable answer to the fundamental operational question the Committee is charged with answering:  Should the Fed expand, contract, or leave unchanged the monetary base through the sale and purchase of securities?

The consequence is an earnest debate among the members of the FOMC as each attempts to divine what to do next.  Last week, for example, Fed Chairman Ben Bernanke necessarily was guarded in his testimony before Congress’s Joint Economic Committee.  Speaking in double negatives about next week’s FOMC meeting he said: “At this point, I really can’t say anything is off the table.”

Really?  Everything is on the table from interest rate hikes to another round of quantitative easing?

If the Fed were to announce another bout of “quantitative easing” as a response to economic weakness, it has no assurance that it would not undermine confidence in the future value of the dollar.  If that were the case, dollar holders could begin to dump dollars as well as euros in favor of gold, precious metals and other foreign currencies.  Such a drop in the demand for dollars would, in fact, be inflationary.

On the other hand, failure to act could lead to yet another financial crisis, as the downward pressure on prices reduces cash flow to businesses large and small, dims the prospects for corporate profits, and forces banks to pull back on loans to all but the most credit worthy borrowers.  Faced with increased monetary uncertainty, individuals would hoard cash and insured bank deposits, further increasing the demand for money.  The financial system would thus amplify deflationary pressures, leading to increased unemployment and triggering another recession.

Such a quandary is the result of a trial and error monetary system that ostensibly manages the economy, hopes to avoid financial crises, and strives to devalue the dollar no more than 20% over the next 10 years.

What is needed is a clear set of operating procedures that will empower the Fed to adjust the quantity of money to shifts in the demand for money in real time.  By matching the supply of dollars to the demand for dollars, the Fed can restore price stability.  Because price stability that can be trusted makes it easier to do business, implementing such a procedure is the only way for the Fed to meet its other legal obligation of encouraging full employment.

To achieve such a price rule, the Fed should consider announcing that it will arrest any further decline in a specified basket of spot commodity prices.  Once the year-over-year change in such an index returns to zero, the Fed would then commit itself to expanding or contracting the monetary base in order to keep the year/year change of the commodity index to within a band of plus or minus 10%.

The stability provided by such a “price rule” would provide an important step toward restoring the ultimate guarantee of the quality of the dollar – once again making the dollar as good as gold.  With the dollar’s purchasing power stabilized, restoring a dollar convertible into a fixed weight of gold would formalize and operationalize a robust, Constitutionally based price rule for U.S. monetary policy.  The result would be a new era of price stability, economic growth, high paying jobs and rising standards of living associated with the gold standard throughout history.

 

 

Herman Cain’s Path to a 21st Century Gold Standard — Charles Kadlec, Forbes.com

This article was published by Forbes.com on May 21, 2012

Herman Cain’s greatest contribution to the Republican primaries was his call for policies that would lead to economic growth by increasing the economic freedom of the American people.  He rose to the top of the polls by matching that rhetoric with his bold plan to replace the current corrupt and inefficient tax system with his now famous 9-9-9 tax reform plan.

Now, in his new book: 9-9-9 An Army of Davids,Cain, along with his Senior Economic Advisor and co-author, Rich Lowrie go beyond 9-9-9 and provide a compelling case and full elaboration on his bold plan to restore economic growth by reforming the tax system, the regulatory state, and the monetary system.  The combination of these reforms, in the words of the authors, would “fundamentally transform Washington.”

The case for 9-9-9 and regulatory reform are fairly well known.  Where Cain breaks new ground is his call for a “21st Century Gold Standard.”  Just as important, he offers a concrete, step-by-step path to make the dollar once again as good as gold, and a new set of operating procedures for the Federal Reserve that would avoid the errors of the past.

The timing of Cain’s book is propitious.  Rep. Kevin Brady (R-TX) and Sen. Mike Lee (R-UT) have each introduced bills in their respective chambers that would take the first steps toward restoring a sound dollar.  By showing that an orderly return to a gold standard is possible, Cain joins Lewis Lehrman, noted financier, monetary authority, and author of The True Gold Standard, in debunking those who claim there is no escape from the paper dollar status quo.

Cain brings to the case for monetary reform his experience as the Chairman of the Federal Reserve Bank of Kansas City, and the work of a team of economic advisors that supported his campaign co-chaired by Mr. Lowrie, this columnist, Brian Domitrovic and Paul Hoffmeister.

In one of the most entertaining parts of the book, the authors capture the craziness of the current floating, paper dollar by asking the reader to imagine what the world would be like if the government could change daily the number of minutes in an hour.  Life would be chaotic. But soon, the private sector would create an entire “chaos industry” to help us cope with the uncertainty of time, just as we now must cope with the uncertainty of the value of the paper dollar.  Before you know it, established media and intellectuals would be “singing the praises of a floating hour and opine on the downright restrictive nature of the old barbaric system” under which people would be expected to arrive to meetings on time!

In a more serious vain, the benefits of a dollar as good as gold are reported:  Higher economic growth, lower unemployment, stable prices, rising real wages and living standards, a less cyclical economy, and virtually no financial crises.  The myths used by the defenders of the paper dollar also are dispelled, most importantly including the charges that the gold standard “caused” the Great Depression, that it would restrict the ability of the economy to grow, and empower Wall Street and financiers to the disadvantage of Main Street and American families.

The historical evidence is clear:  the paper dollar that we have lived under since 1971 has underperformed the gold standard on every important economic variable, and must treated for what it is, an experiment that has completely failed to increase employment and minimize recessions by giving twelve men and women on the Federal Reserve’s Open Market Committee the power to manipulate the value of our money and interest rates.

Six principles are offered to guide the transition to the 21st Century Gold Standard: Continue reading »

 

We Need A Dollar As Good As Gold — Herman Cain, Wall Street Journal

A Gold Standard is to the moochers and looters in government what sunlight and garlic are to vampires

My 9-9-9 tax code replacement plan provoked enormous enthusiasm during my presidential campaign because it represents the largest transfer of power in the history of the republic. By instituting a 9% income tax, a 9% business tax, and a 9% national retail sales tax—and eliminating most of the remaining tax code (including the many hidden taxes built into the process of doing business)—we would simplify the system for everyone and rob politicians of their ability to use the code to manipulate economic activity.But why stop there? Washington thwarts prosperity through more than the tax code.

The present monetary system is an abysmal failure by any objective measure. As the former chairman of the Federal Reserve Bank of Kansas City, I can say with firsthand experience that it is not the people of the Fed, but the actual structure, that needs reform. Our liberty and prosperity depend on it.

Think of economic growth as the result of two gears operating together—low tax rates and sound money. When both gears are fully engaged, the economy moves forward. When the gears become disengaged, the middle class suffers. That’s why, as convinced as I am of the power of the 9-9-9 concept, we need sound money to go with it. Read entire article

 

 

This article originally was published by Forbes.com on May 7, 2012

Mike Lee, U.S. Senator from Utah, recently sponsored a bill entitled the “Federal ReserveModernization Act.” It is the counterpart toRep. Kevin Brady’s Sound Dollar Act of 2012 (which enjoys 35 House cosponsors and, of equal note, already is drawing liberal fire). The Brady/Lee legislation represents an important first step forward to restoring good money to America: money that can provide a foundation for prosperity with equity, security, and, of at least equal importance, constitutional integrity.

The Sound Dollar Act/Federal Reserve Modernization Act directs America’s central bank to monitor the prices of major asset classes including gold and the value of the dollar relative to gold. Gold is the only asset twice specified. One of its three broad categories is entirely devoted to gold. Gold thereby emerges designated as a more important factor in monetary policy than it has played in two generations.

Mr. Brady and Mr. Lee thereby offer a first step toward Constitutional money, which is a dollar defined as a fixed weight of gold. Constitutional money was the good money, conceived by the Founders and installed by George Washington and his Treasury Secretary Alexander Hamilton, which gave the impetus to America to prosper. Both Lee and Brady demonstrate astute awareness of Constitutional history and performance.

Mr. Lee’s official blog notes: “As for monetary policy, the American experience from the First Bank in 1791 to the modern Fed is that the economy operates more efficiently when the central bank, managed by competent individuals, operates independently with a rules-based approach. …. For too long, Congress has abdicated its responsibility of ensuring that the Fed’s mandate properly reflects the lessons of history while building toward the future.”

Key words? “The lessons of history.”

Mr. Brady, too, draws on history in a recent speech before the Shadow Open Market Committee:

“Not far from here on West 141st Street stands the Grange, the recently restored home of Alexander Hamilton, our first Secretary of the Treasury. After careful consideration, Hamilton devised a monetary system that revived a moribund American economy and fostered rapid economic growth. As Hamilton did in his day, we must thoughtfully and clearly define the role of the Federal Reserve going forward.
….
“Learning from the past and looking to the future, Congress must select the right monetary policy mandate, maintain a Fed independent of political pressure, and hold the Fed accountable for the results.

“So let us examine what monetary policy should be going forward.” Continue reading »

Whose Nuts?

 Articles, Gold Standard  Comments Off
May 032012
 

Amity Shlaes provides a balanced report on the implications of the Bank of England Study, which compares the results of the current paper money system to eras under the gold standard.  Overall, the gold standard comes out on top.  Shouldn’t economists try to understand why instead of simply rejecting it out of hand?

Gold Standard for All:  Nuts to Paul Krugman — Amity Shlaes, Bloomberg

Nut cases. That’s what they are. And if you take an interest in them, you are a nut case, too.

That’s the consensus among credentialed economists who describe advocates of a return to the monetary regime known as the gold standard. In fact, the economic pack will marginalize you as a weirdo faster than you can say “Jacques Rueff,” if you even raise the topic of monetary policy in relation to gold.

An example of such marginalizing appears in a recent issue of the Atlantic magazine. Author Adam Ozimek lists four rules upon which economists overwhelmingly agree. Right away, that puts readers on guard; they don’t want to be the only one to disagree with eminences.

The first rule Ozimek offers is that free trade benefits economies. So obvious. That makes the penalty for disagreement higher. Then you read down to the final principle: “The gold standard is a terrible idea.” By putting the proposition in such strong terms, the author raises the penalty for disagreeing. If you don’t subscribe to this view, you risk both being classed as the kind of genuine nut case who believes in protectionism, and enduring the disdain of other economists — “all economists,” as the Atlantic headline writer summarized it.

But “all economists” is not the same as “all economies.” The record of gold’s performance in all economies over the past century is not all “terrible.” Especially not in relation to areas that concern us today: growth, inflation or the frequency of bank crises. The problem here may lie not with the gold bugs but with those who work so hard to isolate them.  Read article

Apr 172012
 

This article was published originally by Forbes.com on April 9, 2012

Good Money:  Why Rep. Kevin Brady’s Sound Dollar Act Worries Barney Frank

by Ralph Benko

Why is Rep. Barney Frank rounding up his liberal legislative militia to oppose the Sound Dollar Act of 2012? This is a bill recently introduced by Rep. Kevin Brady, top Republican on the Congressional Joint Economic Committee. It is co-sponsored by 31 of his House colleagues and has a Senate counterpart from Utah’s Mike Lee.

A panicked Rep. Frank snapped to immediately. He rounded up 26 liberal democrats to sign a letter of opposition. “We believe strongly that the dual mandate should be maintained, and we believe that the Federal Reserve’s actions in pursuit of that mandate have been helpful in dealing with our unemployment problem,” wrote Frank and fellow liberals to committee chairman Spencer Bachus.

Believe it or not, Frank’s beliefs do not always coincide with common sense reality. As Boston Globe columnist Jeff Jacoby wrote in 2008:

“Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that “these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis.” When the White House warned of “systemic risk for our financial system” unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

“Now that the bubble has burst and the “systemic risk” is apparent to all, Frank blithely declares: ‘The private sector got us into this mess.” Well, give the congressman points for gall.

Frank and other liberals are hostile to legislation that constrains the Fed’s “discretionary activism.” Discretionary activism is what Columbia dean (and key Romney economic policy advisor) R. Glenn Hubbard indicts in Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity. This book contains a chapter entitled “Why an Easy-Money Street is a Dead End” and a subchapter “The Road to American Prosperity Cannot Be Paved with a Cheap Dollar.”

Brady’s legislation plays a major role in helping the GOP formulate a crucial plank in its economic platform: good money. Even more potent is this bill’s extraordinary emphasis on gold. In its findings, the Act directs the Federal Reserve to monitor prices in three sectors. One is, exclusively, gold: The “Federal Reserve should monitor … the value of the United States dollar relative to gold… to determine whether the Federal Reserve’s monetary policy is consistent with long term price stability.” Another section directs the Fed to monitor the prices of “major asset classes (including… gold and other commodities…).”

Gold alone thus occurs in two of the three directives to the Fed. This appears by no means accidental. Brady elegantly has structured this legislation in a way that gives space both to the conservatives (supply side, movement, libertarian, and constitutionalist Tea Party) and Establishment Republicans (and conservative Democrats) to come together to work out what good money looks like.

The overwhelming conservative consensus is for the dollar, whether issued by the government or the private sector, to be defined as a fixed weight of gold and for currency convertibility. Intramural differences among conservatives, and between conservatives and Republicans (and, for that matter, Blue Dog Democrats who are attuned to the popularity of the gold standard with voters) are far narrower than the differences between conservatives and liberals. The Weekly Standard.comreports Brady’s position: “Our goal today…is to start a thoughtful debate….” He succeeds.

A highly respected member of the Republican policy establishment, Stanford University professor of economics John Taylor, recently testified before the Joint Economic Committee in favor of the Sound Dollar Act re-enforcing Dean Hubbard’s key point. Prof. Taylor then wrote a Wall Street Journal op-ed entitled The Dangers of an Interventionist FedA century of experience shows that rules lead to prosperity and discretion leads to trouble.

The conservative policy establishment view is exemplified by the Conservative Action Project chaired by President Reagan’s counselor and attorney general Edwin Meese III in its Conservative Consensus For 2012 issued last December. This important document firmly placed sound monetary policy in the top of the conservative agenda. The conservative policy establishment consensus also is exemplified by two nonprofit groups professionally advised by this writer, the American Principles Project and the Lehrman Institute’s monetary policy site, and by Atlas Economic Research Foundation’s Sound Money Project. These thought leaders, and many others, teach about a dollar defined as a fixed weight of gold and currency legally convertible at that weight.

The hard left reacts to monetary reform and the gold standard as a vampire does to a crucifix. Astute Roosevelt Institute fellow Mike Konczal, blogging atRortybomb last April 2011 began the litany: “Conservatives are organizing against a full employment mandate and rallying around the gold standard wing of their party.” Since then, ThinkProgress’s Marie Diamond has stated that “Tea Party groups are determined to make returning to the gold standard a litmus test for GOP presidential candidates.” Paul Krugman warned in theNew York Times that “Gold bugs have taken over the GOP.” Thomas Frank, inHarper’s Magazine, called gold “yet another eccentricity of the right-wing fringe… into the mainstream of American life.” Nouriel Roubini slurred supporters of gold as “lunatics and hacks.” Former Clinton Treasury Secretary and chair of Obama’s National Economic Council Larry Summers called the gold standard “the creationism of economics.”

Yet so bad has discretionary activism proved that even the center-left New York Times could headline, last August, a column A Gold Standard is Unthinkable No More. The sober, certainly not right wing, Bank of England issued a report last December which Bloomberg headlined as Global Economy Worked Better With Bretton Woods Currency System, BOE Says — Bretton Woods being a dilute gold standard.

Outside the cozy precincts of the hard left the gold standard has been rehabilitated. Clearly there is a productive conversation to be had between gold’s distinguished conservative and classical liberal proponents — such as Steve Forbes, Lewis Lehrman, Sean Fieler, James Grant, Judy Shelton, Brian Domitrovic, Lawrence White, Charles Kadlec, John Allison, John Tamny, James Rickards, and other respected figures who support gold convertibility — and the many distinguished mainstream economists who lean toward the something like the Taylor Rule. Brady has created a context for that thoughtful debate.

Since monetary reform is crucial to robust job creation Brady performs an invaluable public service by putting it front and center. The sponsors of the Sound Dollar Act demonstrate genuine statesmanship in moving the conversation forward in such a way as to allow everyone who believes in prosperity, with equity, through good money to unite behind Taylor’s axiom: “[T]he Federal Reserve should move to a … more rules-based policy of the kind that has worked in the past.” Rep. Brady and Sen. Lee have introduced legislation that represents a mortal threat to the practice of central planning that lingers on at full strength in just three capitals, Pyongyang, Havana, and Washington, DC … panicking Barney Frank.

 

 

Ben Talks Down The Gold Standard, In Favor of Bernanke — John Tamny, RealClearMarkets

“Facing increasing pressure from an electorate understandably skeptical about the ability of his central bank to manage the dollar, Fed Chairman Ben Bernanke used a speech at George Washington University this week to talk down the gold standard. Walter Bagehot long ago wrote that central banks attract “vain” and “grasping” men, so it’s no surprise that Bernanke would decry a currency system that would happily render him and his Fed irrelevant.

“The good news is that if Bernanke’s speech is seen as the “gold standard” for objections against same, the path to stable money values anchored in gold free of hubristic central bankers like Bernanke is far more certain. Indeed, his objections don’t stand up to the most basic of scrutiny, and in Bernanke’s case, were often contradicted by Bernanke himself. Though he did so unwittingly, with his every utterance Bernanke made a wildly strong case for gold…

“Never lacking in unwarranted self-assurance, Ben Bernanke set out this week to discredit the gold standard, and in doing so, perpetuate the employment of meddling central bankers. The problem for the Chairman is that a speech meant to discredit the gold standard made the case for it in ways that true gold standard advocates have never done on their own. Thank you, Mr. Chairman.”  Read entire article

 

By Charles Kadlec

This article was published by Forbes.com on March 19, 2012

Do you know why oil and prices are moving sharply higher? Some blame the oil companies, charging they are manipulating prices. Others cite U.S. sanctions on Iran and the threat of a military encounter that would disrupt the flow of oil from the Middle East.

Speculators, too are blamed for ostensibly bidding up the price of oil. In the political arena, President Obama is taking credit for increased domestic oil production even as his critics point out the slow pace of drilling permits issued by his Administration soon will hamper additional increases in the U.S. oil production.

Yet, the basic reason for higher energy prices is being overlooked, even though it is right before our eyes: Oil prices are up because the value of the dollar is down. Our common sense hides this source of higher prices because we view the dollar as fixed, and prices as moving. News reports explain the sharp rise in consumer prices in February were caused by higher energy and food prices, implying that higher prices cause inflation. Of course, higher prices do not cause inflation. Higher prices are inflation.

The cost of this deception goes well beyond the vilification of the oil industry and free markets. The real price of the on-going debauchery of the dollar is measured by the loss of our prosperity and the debasement of our liberty. Continue reading »

Copyright 2012 by Ralph Benko and Charles Kadlec, Washington, DC and Laguna Woods, CA.
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