Ralph, you noted this first, but this New York Sun editorial is worth a closer look. In a glowing column Friday, the Sun praised Ted Cruz for his astute questioning of Federal Reserve Chair Janet Yellen in last week’s Joint Economic Committee hearing, and in particular for focusing on the effectiveness of having a monetary rule verses current Fed policy:
The key question Mr. Cruz asked is whether Mrs. Yellen agrees with her predecessor Paul Volcker that the absence of a cooperatively managed rules-based monetary system has not been a great success. Mr. Volcker offered that assessment in a speech to the Bretton Woods Committee in May 2014; it was first reported in a Wall Street Journal op-ed piece by the editor of the Sun and, given Mr. Volcker’s stature, was an important moment in the debate over monetary reform.
Mr. Cruz sketched the economic turmoil since we abandoned the Bretton Woods system for fiat money. He also pressed Mrs. Yellen about a view — of Nobel laureate Robert Mundell, among others — that the central bank’s tightening early in 2008 precipitated the crisis that became the Great Recession. Mrs. Yellen seemed startled, even confused, by the question, at least according to some, and in any event dodged Mr. Cruz’s query with classic Fed-speak.
The editorial also praised the effort in Congress to address U.S. monetary policy shortcomings, particularly the FORM Act and its accompanying Centennial Monetary Commission:
That is the bill that was passed last month by the House and is now before the Senate. It would set up a system for a regular audit of the Fed, giving Congress a look at how it sets monetary policy; it would establish a Centennial Monetary Commission to review the successes and failures of the Federal Reserve Act as the central bank begins, as it does this year, its second century of operations; and it would require the Fed to establish a rule to guide its formation of monetary policy and let the Congress know what it is.
Ultimately, the Sun predicted that Cruz is shrewdly playing a long game, one that could put America on track to its first election focused on our monetary system since 1896.
Nick Arnold is a researcher for the American Principles Project.