President Donald Trump shows an instinctive, almost primal, grasp of how monetary policy — together, of course, with the pandemic — deserves much of the blame for our current economic woe.
If he does he holds the key to a possible sharp rebound as soon as we pass peak pandemic.
I have written about the dramatic lifting of the Great Depression from FDR’s revaluing gold to adjust for the post-World War I rise in commodity prices (if only temporarily due to later policy fumbles). And of the sizzling post-World War II recovery of a bombed-out Germany thanks to currency reform, so dramatic as to have been called an "economic miracle." I have alluded to many other shockingly powerful economic rebounds rooted in truly great monetary policy. Money is power.
In proclaiming the crucial importance of "good money" to equitable prosperity I know myself to be a voice in the wilderness. I am an outlier in believing that what worked so often in the past would work again now. (That said, special props to my mentor Lewis E. Lehrman, to Steve Forbes, and to esteemed monetary economist Scott Sumner for holding FDR advisor George Warren, chief architect of the revaluation of the dollar, as his role model.)
A few years ago Marc Levinson writing in The Wall Street Journal asked "Why the Economy Doesn’t Roar Anymore: The long boom after World War II left Americans with unrealistic expectations, but there’s no going back to that unusual Golden Age."
There he wrote that "The French called this period les trente glorieuses, the 30 glorious years. Germans spoke of the Wirtschaftswunder, the economic miracle, while the Japanese, more modestly, referred to "the era of high economic growth."
In the English-speaking countries, it has more commonly been called the Golden Age. … Ever since the Golden Age vanished amid the gasoline lines of 1973, political leaders in every wealthy country have insisted that the right policies will bring back those heady days."
So? What happened in 1973?
The year 1973 was when America definitively failed to reopen the gold window "temporarily" closed by President Nixon in 1971.
As Owen Humpage, of the Cleveland Fed, wrote in Federal Reserve History: "On February 12, 1973 . . . the United States devalued the dollar by an additional 10 percent to $42 an ounce. When markets reopened, speculation against the dollar became rampant. Within a month nearly all major currencies were floating against the dollar. The Bretton Woods system was finished."
Bretton Woods was the last vestige of the gold standard. The gold window remains tightly closed ever since and the economy has remained mostly sluggish or erratic. The closest we have come to gold-standard growth rates is Fed Chair Alan Greenspan’s "Great Moderation" and its attendant sizzling prosperity.
What was Greenspan’s secret?
In the February 2017 issue of The World Gold Council’s Gold Investor Greenspan declared, "I view gold as the primary global currency. … Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves. … When I was Chair of the Federal Reserve I used to testify before U.S. Congressman Ron Paul, who was a very strong advocate of gold. . . . I told him that U.S. monetary policy tried to follow signals that a gold standard would have created. That is sound monetary policy even with a fiat currency."
The elites seem strangely unable to connect the dots between the end of the gold standard and the end of the golden age.
Donald Trump, fortunately, is immune to their ridicule.
As Timothy L. O’Brien wrote for Bloomberg in 2016, "Donald Trump Loves Gold and Don’t You Forget It."
Bloomberg’s Michelle Jamrisko reported, during the 2016 campaign, "Make America Gold Again: Calls for Everyone’s Favorite Standard Are Back Again," about how Donald Trump and his runner-up Ted Cruz spoke positively about, or campaigned on, gold.
Shortly after Trump’s election Eliot Nelson and Jeffrey Young of HuffPost observed "we give it a month until Trump calls for the gold standard to be reinstated because he likes the sound of it." Years passed. Circumstances have changed dramatically.
Nelson and Young were just being snarky. But he who snarks last snarks best, especially if, per Greenspan, following signals that a gold standard would have created . . . would be sound monetary policy. Bingo.
Trump’s initiating a restoration of the classical gold standard would change the economic subject. It would satisfy what the Los Angeles Times headlined "Economy in shambles Trump scrambles for a new economic message." Done right this would lay the foundation for an economic rebound of historic proportion.
Mr. President? Money is power. Go for the gold!
Ralph Benko, co-author of "The Capitalist Manifesto" and chairman and co-founder of "The Capitalist League," is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply Side revolution that propelled the Dow from 814 to its current heights and world GDP from $11T to $83T. He served as a deputy general counsel in the Reagan White House, has worked closely with the Congress and two cabinet agencies, and has published over a million words on politics and policy in the mainstream media, as a distinguished professional blogger, and as the author of the internationally award-winning cult classic book "The Websters' Dictionary: How to Use the Web to Transform the World." He has served as senior adviser, economics, to APIA as an advocate of the gold standard, senior counselor to the Chamber of Digital Commerce and serves as general counsel to Frax.finance, a stablecoin venture. To read more of his reports — Click Here Now.
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