Ted Cruz’s ‘Big Problem’

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Senator Cruz has a “one big problem,” according to the Huffington Post. It’s conceding that in the face of the rise of Donald Trump, Republicans have been “reluctantly warming” to the junior senator from Texas. It says he might be the “only alternative” to the “racist billionaire” who could, the Huffington Post suggests, reshape the GOP into something like the “neo-fascist” parties gaining ground at Europe.

So what is Mr. Cruz’s “one big problem”? It turns out to be that he’s for honest money, ideally a dollar defined in terms of gold. That is, he’s got the same problem that dogged those notorious losers like, to name but a few, Geo. Washington, John Adams, Thos. Jefferson, Andrew Jackson, Grover Cleveland, Wm. McKinley, Thos. Woodrow Wilson, Franklin Roosevelt, Dwight Eisenhower, John Kennedy, and Ronald Reagan.

This is a bizarre argument that puts the Huffington Post — the dispatch is by its senior political economy reporter, Zach Carter — in the company of, say, Richard Nixon. It was Nixon who, in 1971, closed the gold window at which America redeemed dollars presented to it by foreign governments. He ushered in the age of fiat money. Huff Post notes that “no country on Earth now relies on a gold standard for its currency.”

Not at the moment, at least. Huff Post cites a 2012 survey by the University of Chicago that found among a group of economists none who support a gold standard. But which group of economists? It turns out to be composed entirely of individuals who oppose the gold standard. Another way to state it would be that a survey of economists who oppose the gold standard found no support for the gold standard. Rush that out.

How bizarre that such a survey skipped such economists as, to name but a few, Lawrence H. White and Donald Boudreau of George Mason; Judith Shelton of the Atlas Foundation; Arthur Laffer of supply-side fame; or even Robt. Mundell. Not all of them are monetary economists and not all of them adhere to any orthodoxy on gold. We’d encourage Chicago to widen its net to include them in its survey.

This, in any event, is an opportunity for Mr. Cruz — a chance to stand apart from the rest of the Republican field, to side with the American Founders, and to campaign on constitutional fundamentals. It’s a chance to talk about how unemployment averaged 4.7% during the years of Bretton Woods, when a gold-exchange standard was in effect, and soared to an average of 6.4% in the generation after 1971.

Something similar happened in respect of Thos. Picketty’s inequality index, which began soaring in the 1970s, and Senator Elizabeth Warren’s personal bankruptcy rate, which also started rising after we entered the age of fiat money. If the majority of economists oppose the gold standard, maybe they are the wrong group to be consulting on the matter to start with.

After all, it was not to economists that the Founding Fathers delegated the constitutional monetary powers and disabilities. No, it was to the Congress of the United States. That is the constituted body. The Founders understood that the monetary power involves more than the dismal science — there are legal, commercial, regulatory, and moral elements to the monetary question. No wonder the Founders delegated money to the Congress.

That is, to Senator Ted Cruz and his colleagues. It is precisely Mr. Cruz and his colleagues who hold the monetary power — particularly at this hour of this Congress, in which the Fed Oversight Reform and Modernization Act has passed the House and is before the Senate. This measure would set up a regime to audit the Federal Reserve, require it to establish monetary rules, and improve governance of the central bank.

It would establish a Centennial Monetary Commission to review the performance of the Federal Reserve during its first century and see what adjustments might be required. No doubt the commission would employ some economists. The Federal Reserve Board alone employs three hundred of them. It’s unclear how many economists would be put out of work by a gold standard. The University of Chicago hasn’t yet surveyed on that question.

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