Looking Forward to Gold

As President Obama was getting set to address the Congress in respect of jobs, our attention was on James Grant. We’re adding the editor of Grant’s Interest Rate Observer to our list of sages who can articulate the case for monetary reform in the spirit of Charles de Gaulle. Mr. Grant didn’t summon 1,000 journalists to a press conference in the salle de fetes the way the president of the Fifth French Republic did in 1965. He went him one better, appearing this week on an edition of CNBC’s Squawk Box devoted to the gold standard. The result is a memorable piece of journalism that is yet another instance of an important institution — CNBC — taking a new and suddenly more respectful look at what has in recent decades been set down as, to use Keynes’ phrase, a barbarous relic.

The show starts off with a piece by the CNBC graphics department that traces the history of the gold standard. It is followed by the host, Steve Liesman, senior economics correspondent of CNBC. He tells the audience that he “came into this with the economic orthodoxy that a gold standard is a stupid thing.” More recently, however, he is now “a little more in the middle on this.” This reflects a newsworthy phenomenon. People are rapidly getting ahead of the government on this. We have this sense not only from our own interviews but from the astonishing poll rankings of, say, Congressman Ron Paul, whose entire career has been centered on a campaign for sound money.

This in and of itself is not surprising. The dollar, after all, is in a historic collapse, its value having plunged to well less than an 1,800^th of an ounce of gold. What is surprising — or, if not that, gratifying — is the raptness of the attention now being paid to a journalist like Mr. Grant, who offers the gold standard not in absolute terms but as “the least imperfect monetary arrangement available.”

Quoth Mr. Grant: “If one were interested in the following properties for a monetary standard, one might look to a gold standard. For example, you’d want something that is synchronous, that is reciprocal, that links . . .All nations together,” Mr. Liesman interjected. “Rather than what is happening now, which is that the G20 seems to be really fraying really at the center . . .”

“You’d want a monetary system that is objective, in which there were certain known rules. Now we have an improvisational one, with the mandarins at our Federal Reserve making stuff up as they go along … perfumed clouds of algebra and differential calculus … what are they talking about?”

Here Mr. Liesman interjects again: “Right now, when you read the Fed minutes, when you listen to all the Fed talkers, it is something again that recommends the gold standard. Because what is the monetary policy? It is the policy that is the compromise of the Fed officials and all their disparate views.”

“It is a compromise,” Mr. Grant responded, “among people who really seem to have no first or fixed principles. If you read Bernanke’s speech at Jackson Hole, he begins to tell us what the Treasury ought to do about the deficit, he begins to tell us what Congress might do to improve the process of budgeting, he tells us that we are deficient in K through 12 educational standards. What does the secretary of education think about QE3? I want to know.”

Mr. Liesman greets this point with an appreciative guffaw, then a cackle, which strikes us as what has to be a sobering moment for Messrs. Bernanke and Co. We are at a point where a major speech by a Fed chairman is seen as being met by one of our most serious journalists with merriment and laughter, which Mr. Grant returned with this straightforward point: “So what we want it seems to me is a monetary system that is objective, that we can understand, that has something at its bottom, as its root something that we can recognize as money. Gold is recognized as money most places on the planet.”

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We wouldn’t want to get so far up on our high horse that we fail to acknowledge that Mr. Bernanke has some things he could do to cause value to flow back into the Federal Reserve notes he has been issuing. Chairman Volcker showed us that in the 1980s. But it’s going to be hard for Mr. Bernanke absent a president to work with of the vision of the Reagan that stood in the White House for much of the period that Mr. Volcker ran the Fed. The irony is that President Obama will shortly be giving a speech on jobs. We are in a cru in which, as Ralph Benko, among others, has been pointing out, sound money is the most important plank of a real jobs program. This has so far eluded the Obama administration, and the chorus grows for the kind of profound, era changing reform that is being called for by Mr. Grant and and those who are prepared to move forward to a gold standard.