The Sorcerer’s Apprentice

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.

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That old sorcerer has vanished / And for once has gone away! / Spirits called by him, now banished, / My commands shall soon obey.

* * *

So begins Goethe’s poem on the apprentice who, with the old sorcerer off from work, commands a broom to fetch water only to discover he is unable to halt the ensuing flood. We called up the verses after reading the latest number of James Grant’s Interest Rate Observer, which warns that “digital inflation detectives” are reporting that American consumer prices at the end of February were up 3.6%. Mr. Grant ends by reminding his readers of Goethe’s prophetic parable.

The next thing you know, President Trump’s chief economic adviser, Gary Cohn, is on Fox News Sunday kvelling about the Federal Reserve. The Fox News host, Chris Wallace, had asked Mr. Cohen whether he was worried about the prospect that rate hikes by the central bank could hinder economic growth. Mr. Cohn had replied that the Fed is an “independent agency” that is “trying to always modulate, you know, economic growth with inflation, with the workforce” and “has been doing a good job.”

We almost fell out of our socks. As recently as Labor Day, after all, President Trump was warning reporters on his campaign jetliner that the Federal Reserve had created a “false economy” by suppressing interest rates in the hope of shoring up indexes. Hillary Clinton was insisting that it was inappropriate for any candidate to criticize the Fed. But Mr. Trump pressed on, admirably in our view, blaming the Fed for an illusion of prosperity and employment. He spoke warmly of the gold standard and monetary reform.

Nor was that mere off-the-cuffery. The Republican platform on which Mr. Trump ran for president calls for an audit of the Fed, which means Congress asserting its authority as the institution holding the constitutional monetary powers. It also calls for the creation of a monetary commission that would look at, among other things, defining the dollar in federal law (as it has been done for most of the time since the Constitution was framed in 1787).

Since the voters made their decision, though, we haven’t heard peep one from Mr. Trump about any of that. Secretary Mnuchin and Mr. Cohn sound more like Hillary Clinton than the Donald Trump who won the election. The Trump administration has been no clearer about monetary policy than President Obama’s administration was. Meantime, the New York Times is out with a story suggesting that President Trump and the chairman of the Federal Reserve, Janet Yellen, are “headed toward a collision, albeit in slow motion.”

“Mr. Trump,” notes the Times, “has said repeatedly that he is determined to stimulate faster growth while the central bank, for its part, is indicating that it will seek to restrain any acceleration in economic activity.” Our own view is that sooner or later, Mr. Trump will have to step up and do in respect of monetary reform what he promised in the campaign. Let him remember that in Goethe’s tale, the apprentice tried to halt the runaway broom by taking an ax and clefting the broom in two, only to discover he was contending with two brooms and twice the flood. Mr. Trump will look like a fool if get ends up in a similar fix.


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