A Man for Our Times?

We see in the Times where the former proprietor of the New Republic, Chris Hughes, is looking to get a Ph.D. in central banking history. We don’t know Mr. Hughes, but we take a Democrat like him entering the fray over monetary policy and central banking as a positive development. Especially because, according to the Times, the sow’s ear that he’s going to try to make into a silk purse is Arthur Burns.That should be fun. Arthur Burns, the 10th chairman of the Federal Reserve, was nominated by President Nixon and served for eight years, ending in 1978. He had one magnificent quality — he smoked a pipe. Then again, too, he was the chairman under whom Federal Reserve notes lost a greater percentage of their value than under any other chairman. The greenback under Burns shed a staggering 80 percent of its value as measured in gold.Which is the monetary metal in which the dollar was defined, at a 20.67th of an ounce, when the Federal Reserve was created by Congress. Under President F. D. Roosevelt, though, our government defaulted, and eventually a 35th of an ounce of gold became the law, such as it was, by the time Burns swore the constitutional oath. When Burns stepped down in March 1978, the dollar’s value stood at but a 190th of an ounce of gold. Today, the value of the dollar is barely more than a 2,000th of an ounce of gold. This catastrophic plunge can be traced in part to the monetary machinations during the Burns era at the Fed. Chief among these was Nixon’s decision, in 1971, to sever the historic link between the dollar and gold. That turned the dollar into a fiat currency and unleashed an age of stagflation that wasn’t tamed until Burns’ successor, Paul Volcker, took over at the Fed. Mr. Hughes, though, seems oblivious to the dollar’s collapse. In his 6,000-word article defending Burns, the monetary metal is noted but twice, in passing. Mr. Hughes, the Times says, is more concerned to reverse Burn’s reputation as “the worst chair ever to head” the Fed. Despite the prevailing view that his “poor policy decisions” let “inflation in the 1970s to jump out of control,” the Times says, Mr. Hughes “thinks he deserves another look.”Burns “gets blamed, without much nuance, for his failure to control inflation,” the Times explains. “I think he’s easily weaponized,” Mr. Hughes suggests. Along with “other Burns revisionists,” as the Times puts it, the former New Republic publisher wants to cast the former Fed chief in a new, more flattering light, noting what the Times calls “the possible virtues” of Burns’ “more complicated view of price increases.”Mr. Hughes sees the ex-Fed chief not as a bungler but as “someone who tried to balance concerns about hurting workers with a dedication to slowing down price increases.” In short, Mr. Hughes wants to deploy Burns’ legacy to support the Fed watchers and economists who are pushing for an armistice in the war on inflation. That would mean abandoning the current two percent inflation target, as some even call for a 4 percent goal.“A robust anti-inflationary policy,” Mr. Hughes contends, “would follow in the spirit of Burns’ approach,” and “not just rely on the Fed to rein in inflation.” Instead, Mr. Hughes suggests, “raising taxes on the wealthy would help cool demand in an economically just fashion.” He seeks to “shift who feels the pain of efforts to rein in inflation,” pushing it “out of labor markets and toward capital holders.” It’s hard to imagine that Burns — a conservative — would credit this line of thinking. On whatever coil he walks in purgatory he must rue the day he didn’t fight harder to keep the gold window open. He knew better, but stuck around when he lost. Once again our government and Congress, faced with a version of guns or butter, is opting for inflation. When Nixon did the same, Burns lamented: “What a tragedy for mankind!” A man for our times.

A Man for Our Times?

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