US Politics

by Ralph Benko

Incoming: 2024. How about Donald Trump vs. Jimmy Carter, a match between the two living one-termers?

Why? Because both pursued policies of dollar weakness.

Jimmy Carter, on the heels of inflationistas Johnson, Nixon and Ford delivered double-digit inflation. He coupled it with high unemployment yielding a towering Misery Index.

President Trump kept talking down the dollar, as pointedly covered by The New York Times in August 2019 amid many other sources. “On Thursday, the president again publicly expressed displeasure at the relative strength of the dollar, describing it as a drag on American industrial exports and the result of Federal Reserve monetary policy.”

As Milton Friedman determined, buttressed by much further evidence since 1961, there’s a characteristic lag, roughly two years, give or take, between (at the president’s behest) the Fed’s flooding the zone with dollars and rising prices. Looks to me like the Trump inflation chickens are coming home to roost right on schedule.

Equally worrisome are the chickens that Biden, in reappointing inflation dove Jerome Powell as Fed chair, is releasing. Powell recently signaled that he will slowly end the monetary ease that has been the hallmark of his chairmanship.

Let’s hope so. Will he be hawkish enough?

As reported by Politico in a recent reappraisal of the anti-inflationary stance of former regional Fed bank president Thomas Hoenig, “Between 2008 and 2014, the Federal Reserve printed more than $3.5 trillion in new bills. To put that in perspective, it’s roughly triple the amount of money that the Fed created in its first 95 years of existence. … Hoenig … warned that it would suck the Fed into a money-printing quagmire that the central bank would not be able to escape without destabilizing the entire financial system.”

Will Powell do the right thing? And will he do the thing right?

Meanwhile, President Biden is being Carteresque in sheer inflation cluelessness. The editorial board of the Wall Street Journal recently (and fairly) lambasted the president in Carving Up Biden’s Inflation Beef for scapegoating Big Business for causing inflation: “Inflation keeps rising, and maybe the place where Americans have noticed it most is the grocery store. Prices have climbed 16% at the meat counter in the last year, and so President Biden is rounding up the usual scapegoats: Big meat producers.”

Nonsense. As Milton Friedman said it first and best and a mountain of evidence supports, inflation is always and everywhere a monetary phenomenon.

And it is most unhelpful that Republican economic policy folk, including some who served under Reagan and, thus, should know better, are misattributing inflation to the bipartisan infrastructure spending.

I’m a deficit hawk but spending isn’t the cause of inflation. That’s Neo-Keynesian dogma. Even Keynes would shudder at such blather.

Misattributing the cause of inflation ingratiates its proponents with (the once and perhaps future president) Donald Trump, absolving his reckless calls to weaken the dollar. And it pins the tail on the Donkey.

But in the words of Wolfgang Pauli, “Not only is it not right, it’s not even wrong!” Bad policy.

We haven’t seen such public cluelessness on the cause of, and cure for, inflation since Jimmy Carter was president. Carter, in an unctuous national address, on October 24, 1978, said:

“Good evening. … Inflation is obviously a serious problem. What is the solution? I do not have all the answers. Nobody does. Perhaps there is no complete and adequate answer. … I’ve spent many hours in the last few months reviewing with my own advisers and with a number of outside experts every proposal, every suggestion, every possibility in eliminating inflation. If there’s one thing I have learned beyond any doubt, it is that there is no single solution for inflation.”

Nonsense! The cause of inflation was, and is, excessive money printing by the Fed. Fed Chairman Paul Volcker, once Reagan had his back, put that knowledge into practice and ended inflation for almost 40 years.

The single solution for inflation lies in stopping excess money creation. Both the Donks and the Pachyderms have forgotten.

The true cause of inflation still resides in popular consciousness. An April 2020 meme showing Fed Chairman Jerome Powell “money printer goes brrr” with a white banner, “inflation,” went viral.

Click here for a rueful chuckle. That said, the joke’s on us.

The Democrats scapegoat supposedly greedy business. The Republicans scapegoat supposedly reckless federal spending. Both are “not even wrong.”

Karl Marx was right about exactly one thing. In The 18th Brumaire of Louis Bonaparte Marx noted dryly, “Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce.”

As to inflation? Here comes the farce.

If America craves inflation … why not the best?

Trump vs. Carter, 2024!

republished by permission from Newsmax

by Ralph Benko

Could the gold standard, surprisingly, become politically viable? Yes.

Here’s how.

Most politicians, of both parties, bitterly cling to the status quo. They are averse to unconventional proposals.

Proposals, that is, such as the gold standard. Until, that is, things get bad enough.

Near 7% inflation is bad enough to persuade at least some that it’s time to do what Walter Heller told the Congress on May 7, 1985: “Rise above principle and do what’s right.”

No matter how hard President Biden tries to whistle past the peculiar political graveyard of inflation, he cannot evade this cold draft.

Despite all the blather about Biden’s profligate spending as driving inflation, that’s merely politically weaponizing fiscal policy. As Milton Friedman famously observed “inflation is always and everywhere a monetary phenomenon.”

Follow the money. One or more Republican presidential aspirants are likely to call out the real cause, prescribing the real cure. Time for the gold standard’s star turn.

As I noted at The Street in 2015, almost all academic economists have contempt for the gold standard. And almost all, with a handful of exceptions like the gold-standard-friendly Professor Steve Hanke, failed to foresee the current inflation.

Peter C. Earle and William J. Luther’s new and excellent The Gold Standard: Retrospect and Prospect, reviewed here, shows that the gold standard has an excellent track record for averting inflation while creating a climate of equitable prosperity.

Presidential aspirants? Follow the money!

So, can gold be a political winner? Yes.

A decade ago, polling showed that we voters, especially Republican caucusgoers and primary-voters, strongly favor the gold standard. As I wrote at Forbes in 2011:

“Rasmussen’s … recent poll show[ed] 44% of likely voters favor returning to the gold standard, 28% opposed. … Rasmussen’s results show that 79% of Tea Party voters (and 69% of simply self-described Republicans) would favor such an elitism-constraining gold standard.”

As I wrote at Roll Call in 2012:

“The Polling Company [in November 2012] found that advocating the gold standard would move votes where they most matter. The gold standard is highly popular with tea party voters, movement conservatives and others disproportionately likely to attend the Iowa caucuses or vote in the New Hampshire and South Carolina primaries.”

My advocacy propelled a monetary commission plank (explicitly including the gold standard) into the 2012, then 2016, Republican national platforms. This was surprisingly well received by media leaders such as the FT, wherein Robin Harding and Anna Fifield wrote, in Republicans to embrace gold in platform:

“The gold standard has returned to mainstream U.S. politics for the first time in 30 years, with a ‘gold commission’ set to become part of official Republican party policy.”

And what about actual candidates?

In the course of the 2012 primaries I met one-on-one with then-top-tier contender Newt Gingrich (long ago co-sponsor of Jack Kemp’s iconic “The Gold Standard Act of 1984”). The former Speaker responded with a call for a new Gold Commission.

His standing in the race was lofty … until the revelations of certain peccadillos torpedoed his candidacy. Somewhere around peak Gingrich, the Mitt Romney campaign brought me into their national campaign headquarters to brief them on the gold standard, likely eyeing the traction that Romney’s rivals were gaining with gold.

However, Romney’s Bain Capital-type conventional wisdom campaign “suits” steered away from field-testing gold. Romney, of course, went on to lose the general election.

Supply-side hero Steve Forbes made the gold standard part of his two presidential campaigns. Rep. Ron Paul, also a presidential contender, previously co-authored, along with my mentor Lewis E. Lehrman, the Reagan Gold Commission’s minority report, The Case for Gold and was widely seen as a gold standard advocate.

The late Herman Cain, also briefly a top tier presidential contender, praised the gold standard. And as I observed in The Hill in 2016, Ted Cruz, Ben Carson and Mike Huckabee all at least dipped a toe into the shallow end of the gold pool.

Looking forward to 2024, Vice President Mike Pence, speaking at the Detroit Economic Club in 2010, expressed interest in reestablishing the gold standard.

As duly noted in Bloomberg, Donald Trump loves gold. And Candidate Trump rhapsodized about the gold standard on the campaign trail twice in 2015:

“We used to have a very, very solid country because it was based on a gold standard,” Trump told WMUR television in New Hampshire in March 2016.

Trump commented to GQ: “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.”

The gold standard is more politically palatable, and powerful, than many pundits yet realize. With inflation wrecking our financial security the gold standard regains political relevance.

On to 2024. Onward to a golden age?

Stay tuned.

republished by permission from Newsmax

by Ralph Benko

There tend to be two reactions to proposals for restoring the classical gold standard. One is a common sense “Of course!”

The other is Austan Goolsbee’s Valentine’s Day quip reported by Reuters in 2012:

“Roses are red. Violets are pink. Don’t listen to goldbugs. No one cares what they think.”

Neither stance is strictly wrong. Except, of course, the part about the violets, which are blue. But Goolsbee was Obama’s top economist, not agriculture secretary. Let’s cut him some slack on that one.

That said, let’s not conflate the enthusiasm of cultish goldbugs with the work of rigorous monetary scholars such as those gathered by Peter C. Earle and William J. Luther on behalf of the American Institute for Economic Research in their superb The Gold Standard: Retrospect and Prospect.

This new compilation utterly avoids the dogmatic quicksand that plagues too many gold advocates (never Lehrman, Forbes, Domitrovic or Nathan Lewis nor the late, great, Mundell and Timberlake). Gold’s antagonists, like Paul Krugman, are even guiltier of dogmatism.

Time to lay dogmatism aside. We now have in one place the work of many of the best classical liberal monetary economists working today analyzing the empirical evidence about how the gold standard worked in practice and, done right, could again work to better our lot.

Moot? No.

I recently called upon President Biden to, in a Nixon-to-China move, quell inflation without inducing a recession by adopting the classical gold standard. Alas. No sign he will heed this wise counsel.

Which, however, opens the door for the GOP to go for the gold. Candidate Trump, on the stump, showered praise on the gold standard on two occasions. While he took no action on it as president, Trump loves gold and remains a potent influence with the GOP.

Currently, the GOP is a party without a monetary plank other than the call for a monetary commission from its 2012 and 2016 platforms.

Earle and Luther’s book does the work of that proposed commission, with excellence.

Hello presidential aspirants DeSantis and Christie and Youngkin?

The gold standard is great policy. And great politics.

Earle and Luther’s guidebook begins with the republication of the AIER’s 1971 prophetic commentary on Nixon’s closing the gold window. It then provides a magisterial essay by the excellent George Selgin on “The Rise and Fall of the Gold Standard in the United States.”

Selgin infallibly provides sterling economics, only slightly tarnished by his gratuitously pessimistic political coda.

Earle and Luther then explain in technical fashion “How Does a Well-Functioning Gold Standard Function?” followed by Kwabena Boateng and Joshua Hendrickson on the “Price-Specie-Flow Mechanism and the Monetary Approach to the Balance of Payments As Theories of International Adjustment.”

Then Thomas L. Hogan’s rigorous analysis of “How Good Was the Gold Standard?” reinforces the findings of the Bank of England’s 2011 Financial Stability Paper No. 13: Reform of the International Monetary and Financial System by Oliver Bush, Katie Farrant and Michelle Wright. The data show that the classical gold standard and the gold-exchange standard produced far better outcomes than the current fiduciary dollar system.

Don’t fight the ticker! My favorite contribution, authored by the unfailingly lucid economics professor Lawrence H. White, definitively demolishes as specious the conventional 14 arguments against specie.

Brian P. Cutsinger then answers the question “Is the Gold Standard Feasible?”

Yes, economically. “Harder to answer,” politically.

Andrew W. Salter addresses “The Monetary Rules: Is a Constrained Central Bank as Good As Gold,” concluding that in theory following certain rules might be superior to the gold standard. He archly concludes, “How to achieve that kind of a commitment, however, is far from obvious.”

Nicholas Cachanosky then addresses “International Monies: The Gold Standard, Currency Boards, and Dollarization.” This counsel of pragmatism is followed by Luther’s “Digital Gold: the Case for Cryptocurrencies,” an erudite two cheers for Bitcoin, cryptocurrencies conjoined with a shrewd forecast of “better versions of the monies we already have.”

Because if so they may all be found in The Gold Standard: Retrospect and Prospect.

The Washington Post’s Gene Weingarten, once dubbed me “the second most conservative man in the world” for my gold standard advocacy. Guilty as charged!

Designated by Reagan Gold Commissioner Lewis E. Lehrman (my mentor) as one of the 23 official witnesses before the 1981 Reagan Gold Commission I, unfashionably, was one of only two or three pro-gold witnesses.

I have not faltered in my classical gold standard advocacy since happening upon its record, while in law school, toward the late, inflationary, 1970s. Now I am less lonesome.

Once, I harbored secret doubts that there were enough classical liberal monetary policy experts to do the classical gold standard right. I now lay those fears to rest.

Hello Republican Party and its presidential aspirants?

Thanks to Earle and Luther you now may safely finish Rep. Jack Kemp’s unfinished symphony, “The Gold Standard Act of 1984.”

Onward to a golden age!

republished by permission from Newsmax