Golden Opportunity

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

The big question following Secretary Geithner’s admission that monetary policy was in error during much of the Bush administration is whether the Congress is going to step up to its responsibilities in respect of the national currency. Mr. Geithner’s comments were made last week in response to a question from Charlie Rose about what mistakes he would see looking back. One the secretary cited was that, as he put it, “monetary policy around the world was too loose too long.” That, he said, “created this just huge boom in asset prices, money chasing risk. People trying to get a higher return.”

Mr. Geithner’s concession was put up in lights this morning by the Wall Street Journal. It chided him for laying too much of the blame on foreigners but praised him for making “a break with the steadfast refusal of Fed Chairmen Alan Greenspan and Ben Bernanke to admit any responsibility. They prefer to blame bankers and what they call the ‘global savings glut,’ as if the Fed had nothing to do with creating that glut.” It reckoned his remarks are a sign of “intellectual progress” and called for the role of Fed Policy in our current troubles to be put the center of hearings being planned in the house by the speaker, Nancy Pelosi.

That put us in mind of an editorial called “The Pelosi,” issued by the Sun in November of 2006 and focusing on the failure of the Congress, which oversees the Fed, to carry out its constitutional responsibilities in respect of the currency. At the time the value of the dollar had plunged to be a 637th of an ounce of gold. “If the dollar goes down further from here,” the editorial said, “it might as well be renamed the Pelosi.”

Not that our criticism of monetary policy was partisan. We’d started with an editorial called “The Bush Dollar,” issued in December 2005. At the time the dollar had plunged something like 46% on Mr. Bush’s watch, at the start of which the dollar had been worth a 265th of an ounce of gold. We’d gone on to suggest renaming the scrip “The Greenspan,” issued in September 2007, when the dollar had collapsed to less than a 700th of an ounce of gold. Eventually, when the value of the dollar was dwindling toward an 800th of an ounce of gold, we suggested renaming the greenback “The Bernanke.”

In November of 2007, we observed that the only candidate for president focusing on the collapse of the currency was Congressman Ron Paul. We have our differences with him, but he was w-a-a-a-a-y out ahead of the other candidates on this question. The editorial, “Ron Paul’s Prescience,” quoted an exchange between the congressman and Mr. Bernanke when the latter was testifying before the Joint Economic Committee and the Fed chairman reassured the Congress that he did not expect a crisis of the dollar like happened in 1979 and 1980, when, in the waning months of the Carter years, the dollar collapsed to below an 800th of an ounce of gold.

Within a few months, the value of our national currency fell, albeit briefly, below 1,000th of an ounce of gold, a milestone we marked, in March 2008, with an editorial called “$1,000 Gold,” which observed that the “thing to take from the years that Reagan was president and Paul Volcker was chairing the Fed is that it is not impossible to have a strengthening dollar and economic growth. Not only not impossible, we’d argue. It’s even necessary to have a sound dollar.” That is the thing to remember as the Congress gets ready to hold the hearings being prepared by Mrs. Pelosi, lest we get to the point where the dollar will have to be renamed “The Obama.”


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