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In
2012, I concluded that we
really needed a lot more high-caliber intellectual support if we were
going to come up with a viable alternative to today’s funny-money orthodoxy.
Now it is two years later, and that intellectual support is starting to form.
The Cato Institute, a leading conservative think tank, in September created
the Center for Monetary and Financial Alternatives. To head this new effort,
they chose George Selgin, formerly from the University of Georgia, and one of
our better gold standard experts from academia today.
Also in 2014, Judy Shelton was made a co-director of another new initiative,
the Sound Money Project of the Atlas Network. I gave Shelton’s recent book on
gold-based money a thumbs-up last year. I think it is
the kind of sophisticated and contemporary work that we (still) need more of
today.
These are not wishy-washy middle-of-the-road academics with a vaguely
conservative aroma. They are real experts in gold-based money.
At the recent Cato Monetary Conference in November, Norbert Michel of the
Heritage Foundation gave a nice talk about various “rules-based” approaches
to managing currencies, including fixed-value systems such as a gold-based
system. While Heritage has not yet reached the point of designating a
separate program for monetary affairs, nevertheless I am heartened to see
that they have turned some of their high-powered analytical capabilities
toward this most fundamental of issues. I think they would add a lot by
approaching it from a neutral and skeptical stance, without dogmatic devotion
to the often woefully flawed arguments of the mid-20th-century gold standard
advocates, who were generally just as confused as their Keynesian
counterparts. If they can make a proposal for Social Security reform or tax
reform, why not, in the same sort of practical spirit, a proposal for
monetary reform?
I think that the publication of Steve Forbes’ book Money: How the Destruction of the Dollar Threatens the Global
Economy in June 2014 also moved things
forward considerably. Forbes is, in my opinion, one of the best monetary thinkers in the U.S. today (including academics). In our ignorant era, it takes a brave man
to say that the monetary system the United States used for over 180 years – a
gold standard system – in the process becoming the wealthiest and most
powerful country in the world, is maybe not such a bad idea after all. Now that
he has planted his flag on the issue, with all the expertise to back it up,
perhaps some less-brave people will declare that they actually thought the
same thing all along.
This intellectual leadership is enabling political leadership, in the form of
Kevin Brady’s Centennial Monetary Commission Act of 2013, H.R. 1776. Although this bill disappointed many as it is just a
proposal to create a commission for discussion, nevertheless that is about
where we are in the political process.
Among conservatives, there is increasing realization that Friedman-style
“monetarism,” which dominated the 1980s and much of the 1990s, is just a framework
of justifications for having the Fed manage the fiat dollar a little
differently than other people would have it managed. Not much different
really. We’re seeing a split today between
conservatives that embrace monetarism or perhaps some other funny-money
alternative like nominal GDP targeting, and those who are basically gold
advocates. There isn’t really very much else on the menu.
Also, the gold standard advocates themselves have become considerably more
sophisticated, having abandoned various once-popular schemes by which a gold
parity would be determined by the reciprocal of the amount of gold supposedly
(but probably not) in a vault somewhere, the “pure gold standard” 100%
bullion proposals popular in the 1980s, or the gold coin extremists. I hope they will
eventually abandon more mistaken concepts dating
from the “mind-bending ignorance of the Bretton Woods years.”
For me, this game is global. The United States is probably the least
favorable political environment for such things today. The political system
will likely cling to the fiat-dollar-centric status quo until the bitter end,
because everyone now believes it is the solution to any conceivable problem.
Rather, the ideas and consensus created today are most likely to find
application elsewhere in the world. The Flat Tax idea was also created by
Americans, in the 1980s, with research and support from conservative think
tanks, and finally wide popularization in the presidential campaigns of …
Steve Forbes. In the U.S., it was a flop. But, over thirty other governments
implemented the plan since 2000, and pretty much got the results that the think-tank white papers
indicated, or better.
Thus, the creation of Cato’s Center for Monetary and Financial Alternatives
is the path to getting a gold standard system in — Albania. And a few dozen
other countries. And then we go on from there.
I was talking to a friend about how to get the United States to return to the
high monetary ideals of its founders. I said: “We get at least a dozen
successful and reliable gold standard currency systems set up worldwide,
perhaps as second or ‘alternative’ currencies. Maybe some big countries like
Russia, China, Germany and Brazil introduce their own gold-based currencies.
Then, if there is an environment of monetary crisis in the United States and
Europe, and the gold-based approach has been tested and proven by numerous
other governments, the U.S. would do it too.”
“Yes,” she said. “Of course it would be easy then.”
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