Paul Krugman: “The Trump Economic Team Is Shaping up as a Gathering of Gold Bugs”

Paul Krugman tweets:

That tweet is part of a recent series by Prof. Krugman divining glints of gold in the company of Donald Trump. He predominantly focuses on one of Trump’s appointments, Rep. Mick Mulvaney (R-S.C.) for Office of Management and Budget (OMB).

Krugman astutely points out that Mulvaney once observed that the Federal Reserve has “effective devalued the dollar” — hard to argue with when the dollar has lost 85 percent of its buying power since Richard Nixon closed the gold window in 1971 — and “choke[d] off economic growth.” This is also hard to argue with after 16 years of booms and busts that have left the average US growth rate at about half of its historic trend line for that dreary epoch.

Krugman does not furnish evidence that Rep. Mulvaney has endorsed the gold standard. One can but hope his inference is well grounded.

Exhibit B for his tirade is contained in a tweet referencing investor John Paulson, reportedly close both to the treasury secretary designate Steve Mnuchin and Donald Trump himself. Paulson had recently been invested heavily in gold before slashing his position this year.

My research has not revealed any evidence that John Paulson is a gold standard advocate, affectionately known as a “gold bug.” The record shows Paulson to be an active speculator in gold who has, on balance, done well for his fund thereby. Continue Reading

High Stakes for 2016: Judy Shelton for Fed Chair to Make America Great Again

The Federal Reserve headquarters in Washington, DC (photo credit: Dan Smith, CC BY-SA 2.5)

In The Daily Caller, freelance writer Johannes Schmidt writes “On November 8th I’m Voting For Our Next Fed Chair.” It’s an especially astute column.

While many commentators correctly have focused on the effect of the election outcome on appointments to the Supreme Court, too few have focused on the next president’s appointments to the Fed. This also is of capital importance. Schmidt writes:

The policies implemented by the Fed are especially important (albeit often insidious) because money is our society’s most basic medium of exchange. The manipulation of its value affects every day citizens both in the short and long terms. Decisions taken by central banks–be it to toy with negative interest rates, engage in endless rounds of quantitative easing, or pay banks to keep loanable funds in sterile depository accounts—inevitably impact the value of the dollars we use to buy groceries today or pay off our mortgages over the next couple of decades.

Perhaps more daunting still is the fact that a lack of rules or central bank predictability makes international trade and cooperation difficult, at best. Without central bank coherency, monetary disorder will continue “to undermine the logic of competitive markets and the notion of free trade,” as was previously noted in The Hill.

But do our candidates understand the gravity of their 2018 Fed chief appointment? Are they satisfied with our current discretionary regime and adherence to the failed dual-mandate, or do they think that a return to a rules-based monetary system is critical?

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Good Monetary Policy Is Too Serious a Matter to Be Left to the Fed

Photo credit: Kurtis Garbutt via Flickr (CC BY 2.0)

US News and World Report‘s Andrew Soergel reports that “With White House in Sight, Trump, Clinton Plan Fed Renovations: No matter who wins the election, times are likely changing at America’s central bank.”

“The Fed” really is a synecdoche for monetary policy. Monetary policy used to be, off and on, a significant factor of presidential campaigns. In this election cycle, the monetary policy issue has only arisen occasionally and has not become a major issue of contention.

Pity. It really deserves to be front and center.

What is widely regarded as the most striking speech in presidential campaign history was William Jennings Bryan’s 1896 convention speech concluding:

If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.

Read the full speech here. It electrified the Democratic convention and propelled the young Bryan to the 1896 Democratic presidential nomination and two more. He lost all three times — including in 1896.

As economic historian Brian Domitrovic observed, at Forbes.com:

In 1896, Bryan opposed the gold standard because it had coincided with the 1-2% per year deflation that the country had been experiencing since the 1870s.

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Will President Trump or Clinton Evade What Sunk the Ford, Carter, Bush and Obama Economy?

Whoever wins the presidency there is a lurking issue, the most underappreciated issue in politics.  Getting it wrong destroyed the economy (and contributed to ending the presidencies) of Ford and Carter and tarnished the records of George W. Bush and Barack Obama. Reagan and Clinton got it right and went on to handsome re-election.

The political and economic elites are curiously blind to it. An iconic cartoon by Benita Epstein (view it at benitaepstein.com) shows a myopic middle-aged man gazing into a refrigerator full of nothing but butter. It’s captioned “Hon, where’s the butter?” It is the defining image of “Male Refrigerator Blindness.”

Something like — let’s go gender-neutral trendy — Refrigerator Blindness — Obliviousness to the Obvious — is crushing our prosperity. This would be hilarious … except that misery from a lousy economy has driven millions of able-bodied workers into poverty or near poverty.

The death of the American Dream isn’t funny. It’s tragic.

Refrigerator Blindness is not just a comical trope. An inability to see what’s as plain as the nose on your face is a pop culture meme for an actual Thing, one technically called a “negative hallucination.” Per Encyclopedia.com:

The term [negative hallucination] first appeared in “Psychical (or Mental) Treatment” (Freud, 1890), an article relating to hypnosis. Freud wrote that it was possible to suggest to a hypnotized subject that he or she not see a person or thing that would be present to the subject upon awakening; in such cases the object appears to be “thin air” (p.

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Memo to President Trump or President Clinton: The Gold Standard Made America Both Good and Great

Campaign poster for Republican presidential candidate William McKinley, 1900.

Marc Levinson writing recently in The Wall Street Journal provides a very pessimistic view for the American Dream, “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“:

People who had thought themselves condemned to be sharecroppers in the Alabama Cotton Belt or day laborers in the boot heel of Italy found opportunities they could never have imagined. 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.

[…]

The Golden Age was the first sustained period of economic growth in most countries since the 1920s. But it was built on far more than just pent-up demand and the stimulus of the postwar baby boom. Unprecedented productivity growth around the world made the Golden Age possible. In the 25 years that ended in 1973, the amount produced in an hour of work roughly doubled in the U.S. and Canada, tripled in Europe and quintupled in Japan.

[…]

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. Voters who have been trained to expect that their leaders can deliver something more than ordinary are likely to find reality disappointing.

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To Trump and Clinton: Heed the Lesson Jimmy Carter Never Learned

From left: Donald Trump and former Secretary of State Hillary Clinton (credit: Gage Skidmore/Marc Nozell)

Yesterday I observed here how the 2016 race reflects American conditions in the late 1970s — also stagnant — and how the political elites are echoing President Jimmy Carter’s feckless reaction in his notorious July 15, 1979 address to the nation in which he said, in part:

The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation.

The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.

What’s really going on? The destruction of our social and political fabric derives from stagnation, not vice versa.

My Letter to the Left: the Gold Standard Will Restore Upward Mobility was an analysis of an important piece by Stan Sorscher in The Huffington Post, itself headlined “Inequality — “X” Marks the Spot — Dig Here.” Sorscher perceptively wrote:

The second message is the very abrupt transition from the post-war historic period to the current one. Something happened in the mid-70’s to de-couple wages from productivity gains.

The third message is that workers’ wages – accounting for inflation and all the lower prices from cheap imported goods – would be double what they are now, if workers still took their share of gains in productivity.

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George Gilder: All Forms of Money Must Be Based on Time (VIDEO)

George Gilder is most recently the author the ground breaking The Scandal of Money: Why Wall Street Recovers but the Economy Never DoesHe is a founding fellow of the Discovery Institute and a senior fellow at the American Principles Project, which sponsored this book.

Gilder is also the author eighteen other well-regarded books including Knowledge and Powerand Microcosm. After the publication of Wealth and Poverty, he became Ronald Reagan’s most frequently quoted living author.

In the following clip — from a speech Gilder gave at FreedomFest 2016 — he explains how money, just like all forms of measurement, must be ultimately based on time:

But this is the great moment of opportunity as well as being a scandal. The opportunity has created again the efflorescence of the theory that began with Kurt Godel in 1931 when he showed that any logical system is necessarily dependent on propositions which can’t be proved within the system itself.

I think money is a logical system like that; it has to have roots and value outside of the system itself. Money cannot be part of what it measures. Money is not a commodity. This is the only relevant error I see in Austrian economics — that money is somehow a commodity.

…Money is [not a commodity], it is a measuring stick and it is necessary for a flourishing economy. It too has to be finally based on time. You can’t escape time; you can’t get away from time. When you try to do it, you just confuse everything.

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What ‘JFK and the Reagan Revolution’ Reveals About Trump

Donald Trump (photo credit: Darron Birgenheier via Flickr, CC BY-SA 2.0)

Remember prosperity? Want it back? Here’s the secret formula, which has always worked and would work again: Cut marginal tax rates and restore integrity to the dollar.

Donald Trump is campaigning on meaningful marginal tax rate cuts and implying, with his offstage praise of the gold standard, a solid instinct for monetary integrity and how to produce it. One hopes so as it requires both together.

Here’s the brief. Lawrence Kudlow and Brian Domitrovic have just published what deserves to be the most important book of the 2016 presidential election cycle: JFK and the Reagan Revolution: A Secret History of American Prosperity. It provides a solid understanding of the key issue of the 2016 race — the economy.

Reagan made “Supply-Side” famous by campaigning on and then enacting most of the Kemp-Roth 30% across-the-board tax rate cut. But John F. Kennedy was the original Supply-Sider. The book’s Big Reveal: Jack Kemp designed this tax cut as a direct copy of Kennedy’s own.

[…]

Read the full article at Forbes.com.

Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles Project’s Senior Advisor, Economics. Continue Reading

George Gilder: Angry About Inequality? Here’s the Real Culprit… (VIDEO)

George Gilder is most recently the author the ground breaking The Scandal of Money: Why Wall Street Recovers but the Economy Never DoesHe is a founding fellow of the Discovery Institute and a senior fellow at the American Principles Project, which sponsored this book.

Gilder is also the author eighteen other well-regarded books including Knowledge and Powerand Microcosm. After the publication of Wealth and Poverty, he became Ronald Reagan’s most frequently quoted living author.

In the following clip — from a speech Gilder gave at FreedomFest 2016 — he discusses how near-zero interest rates, far from stimulating economic growth, actually create an environment which fosters inequality.

Zero interest rates essentially zero out time.

As Hayek put it, the root and source of all monetary evil is the government monopoly of money. Matt Ridley said the government monopoly of money not only suppresses innovation and creativity, not only retards growth, it also fosters inequality. Because what we have today is a bifurcated economy produced by the government monopoly of money that fosters inequality.

Think of most of us. Most of us get paid by the hour, paid by the day. We are inexorably caught in the economy of time; that’s how we get compensated. But what’s happened in the world economy in recent decades as a result of the government monopoly of money and that exploitation of that government monopoly to allow the unlimited expansion of government power through the creation of money.

What’s happened is a financialization, a hypertrophy, of finance in the world economy.

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Trump’s Knockout Punch Opportunity

Donald Trump (photo credit: Gage Skidmore)

In the first of the three presidential debates, only Trump’s handlers scored his performance as better than a draw. Both candidates jabbed and scored some points against the other. Pity that Trump did not launch a haymaker against Hillary’s big glass jaw on the economy.

Last May, The New York Times reported:

Hillary Clinton already has an assignment for her husband, Bill Clinton, if they return to the White House next year. The former president, Mrs. Clinton told voters on Sunday, will be “in charge of revitalizing the economy.” “Because, you know, he knows how to do it,” she said.

Less well reported was the progressives’ fury kindled by this. The neoliberal Bill Clinton, who, mostly embellishing on the Reagan/Kemp Supply-Side legacy under pressure from a newly Republican Congress, cut the capital gains tax; mended, rather than ended, a disgraceful welfare regime; and materially advanced free trade.

Massive job growth ensued. After an initial two years of soggy economic growth, America generated over 20 million new jobs under Clinton, putting, among other things, the federal budget into surplus. This, however, did not endear Clinton to the dogmatic progressive left.

The followers of Bernie Sanders, with whom Hillary Clinton then was locked in mortal primary combat (and whose election day turnout she now needs), were outraged. Clinton immediately backpedaled and adopted huge swaths of the Sanders economic platform.

This made her vulnerable in the general election. Candidate Clinton’s initially embracing and then distancing herself from President Clinton’s economic policy success represents a dangerous flip flop. Continue Reading