Wednesday, June 15, 2011
Via RealClear Markets, I encountered an article by Brian Domitrovic of Forbes that lists "10 Things Not to Do When Going Back to Gold." In making his list, Domitrovic argues against several anti-gold myths, but in the process, he caused me to wonder: If fiat currency and all these government controls are so bad, and the best monetary policy is "hands-off," why have central banking, either?
This, in turn, led me to search for anything on the web by Richard Salsman on the subject of central banking, and one of the results was a fascinating 2006 column at Capitalism Magazine, in which Salsman comments at length on Alan Greenpan's legacy, using a comparison of Greenspan's eighteen-and-one-half year "reign" versus the performance of the economy, over a similar period of time, under non-Greenspan central bankers operating without a gold standard and central bankers constrained by a gold standard. The whole thing is worth reading now, but the following passage struck me as particularly relevant:
It's ironic that the gold-based U.S. monetary system of the 1950s and 1960s beats the Greenspan Fed hands down, for during that era Greenspan became an eloquent, clear and knowledgeable proponent of the gold standard and free banking -- that is, no central banking whatsoever. He knew better than most the virtues of the gold standard and the dangers of central banking -- especially arbitrary central banking. Yet he conducted policy arbitrarily. He made no attempt to move the Fed back to a gold-based system, even though he had accumulated the political (and persuasive) power to do so and knew the practical details necessary to achieve it. When the time became politically propitious for a move to gold – when President Reagan proposed a return to a gold-based dollar in the early 1980s -- Greenspan joined with Milton Friedman to scare him out of it, warning that the U.S. might lose its gold stock (true only if the "re-entry" exchange rate between gold and the dollar was set too low). A return to gold, he said, was possible only when the Fed improved its policies to the point where it "replicated" the performance seen under the gold standard. Such performance certainly was not "replicated" under Greenspan; conveniently, then, he could always cling to his lame excuse for never moving the U.S. dollar back to gold. [minor format edits, footnote numbers removed]Later, Salsman closes by saying, "The question we should be asking today is the reverse of the one posed by The New York Times editorialist: 'Who Needs Greenspan (or Bernanke) When We have Gold?'"
I respectfully urge Mr. Domitrovic to add an eleventh item to his list: "Fail to move to a private banking system, completely free from central 'planning.'" Central banking, as a tool for government manipulation of the economy, is clearly a big part of how we ended up breaking our monetary system in the first place.
Here we go again. A Christian commentator argues that John Galt is really Jesus Christ. Yeah. And, anything in a book that resembles a right angle is really a cross, as it so often seemed to me in literature classes at the Catholic university I attended. I forget whether the Reverend Sirico brings up the fact that the letter G was derived from C in Roman times, so that "J.G." really equals "J.C," but I've heard that one before, too.
Matthew Inman on "Why I Love and Hate Having a Smartphone:"
You bring up war, poverty, or famine in a conversation and you'll find a barren vacuum of opinions. You announce what kind of phone you have and you'll spend the next hour enduring an obnoxious holy war.Ugh. That sounds like a hybrid from hell between a "Ford-Chevy argument" and a "bike shed argument."
The next time you hear someone speak of states' "rights" as some sort of panacea for federal tyranny, remember this story: "Massachusetts is backing Vermont's assertions that it is not pre-empted by federal law from closing the Vermont Yankee nuclear plant."