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“We dare to talk about the gold standard and its relative merits, knowing that the merest whisper of a gold standard is enough to elicit the guffaws of the central bankers down the road. Because they say ‘that’s just crazy.’ And I think, really? Crazier than negative interest rates? Crazier than paying banks to keep loanable funds in sterile depository accounts at the Fed? Crazier than having the Fed buy up trillions in government debt, remit the interest payments back to treasury, and then count that as revenue to the federal budget?
“Is it crazier than having hordes of financial market analysts parsing every word uttered by a monetary official, obsessing over the minutes of the latest Fed meeting trying to glean clues about what might happen next? It’s almost as if we’ve forgotten how to engage in free enterprise, because we’re waiting for marching orders from a central planning agency. I think we’re the rational ones. They like to brand us as ideologues, but in truth we’re the realists. And that sobering fact is becoming clearer every day as reality continues to whipsaw global markets.”
Those are the words with which the economist Judy Shelton wrapped up her remarks at Jackson Hole, and let us just say, Patsy Cline herself couldn’t have put it better. Ms. Shelton’s remarks were, our sources report, one, if only one, highlight of the counter-conference that the American Principles Project convened to put into sharp relief the question of whether the Federal Reserve and America’s regime of fiat money are the cause of our national travail during what has come to be called the Great Recession.
What happened at Jackson Hole marks an important moment. For more than 30 years, the Fed has been meeting there annually for a symposium that routinely took place with hardly a peep from the public. This year its arriving delegates were met by representatives of two counter-conferences. One, called Fed Up, was a gathering of Marxists and other left-of-center figures who want to make money easier than it’s been. They reckon that the failure of zero interest rates to create jobs will be rectified by even more easy fiat money.
Fed Up, which was also at Jackson Hole last year, appears to be a dream team for Chairman Janet Yellen, who is famously focused on the employment part of the mandates assigned to the Fed by Congress. That was in 1978, when it passed Humphrey Hawkins. This year the group asking the new and hard questions was the American Principles Project. It mounted a counter-conference that viewed the monetary question through free-market, constitutionalist principles, like those Ms. Shelton sketched above.
Ms. Shelton was but one of a roster of remarkable speakers, including — to name but a few — George Gilder, who sketched his new information theory of money; Jim DeMint, the former Senator of South Carolina who now heads the Heritage Foundation and is steering it robustly into the cause of monetary reform; economist Lawrence White, who offered a historical perspective on government and money; and Benn Steil, who is a fellow of the Council on Foreign Relations and a historian of Bretton Woods.
It is hard to imagine that Congress will be unaware of the richness of this gathering. There was an entire panel devoted to the idea of a national Monetary Commission to chart the way toward monetary reform. The panel included the chief economist of the Senate Banking Committee, Thos. Hogan. Also at the American Principles conference was Congressman Scott Garrett, who is chairman of the Subcommittee on Capital Markets and Government-Sponsored Enterprises for the House Financial Services Committee.
Both the Senate and House committees that oversee the Fed are now taking an look at strategic monetary questions. Their review includes what kind of oversight to give our central bank, what kind of mandates it should have, what rules ought to govern its formation of monetary policy. The House has already twice passed Audit the Fed, the second time but a year ago and by a vote of 333 to 92.This effort has been resisted by the Federal Reserve, and public counter-conferences are inevitable.
Call it a case of the public offering its own forward guidance. Both sides of the debate see a Federal Reserve that has lost touch not only with Congress but with the public. They see a Federal Reserve that is guiding the economy through the exercise of the judgment of Ph.D.s, as James Grant of the Interest Rate Observer often notes. The American Founders would have understood the error of the Ph.D. standard. They gave us a Constitution that granted to Congress monetary powers that our Revolution had wrested from George III, who really was — not to put too fine a point on it — crazy.