Who’s Greenspan Calling Crazy?
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.
So who is Alan Greenspan suggesting is crazy? We ask because, according to the Bloomberg news ticker, the former chairman of the Federal Reserve refused comment when asked to whom he was referring when he voiced a concern, as he did at a conference Tuesday, that America is “not in a stable equilibrium” and that he hoped “we can all find a way out because this is too great a country to be undermined by — how should I say it — crazies.”
No doubt the Democratic Party press is going to start suggesting that the crazies to whom Mr. Greenspan was referring are the Republicans led by Donald Trump. They’re going to remind that The Donald once seemed to suggest, when questioned by Andrew Ross Sorkin on a CNBC broadcast, that he might be prepared to see America default on the federal debt. He said he’d “borrowed knowing that you can pay back with discounts.”
That drove the New York Times — how should we say it? — crazy. It ran out a piece by Paul Krugman called “The Making of an Ignoramus.” That’s the kind of language they use at the Times. Mr. Krugman reckoned that economists were reacting with “amazed horror and horrified amazement.” He suggested that Mr. Trump would throw away the country’s reputation as “the world’s most scrupulous debtor —a reputation that dates all the way back to Alexander Hamilton.”
Maybe, though, Mr. Greenspan is suggesting that the Democrats, led by Hillary Clinton, are the crazy ones. Hamilton, after all, was America’s first treasury secretary; he wrote the law through which Congress first exercised its power to coin money and regulate the value thereof and of foreign coin. Hamilton’s law, known as the Coinage Act of 1792, defined the dollar as a given weight of silver or gold. The basic concept endured through nearly two centuries.
Now, economist Judy Shelton has written, the central bankers insist that those who think of the dollar the way Hamilton did are the ones who are crazy. “Really?” she asks, “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?”
Ms. Shelton, who posed those questions a year ago, is now an adviser to Mr. Trump. He has started blaming the Federal Reserve for creating a “false economy.” The central bank has expanded its balance sheet by trillions, while the Obama administration has borrowed more money than all previous presidents combined. It has struck her — and us — that a President Trump could well be in a position to lead Congress in a historic monetary reform.
The legislature, to which the Constitution grants all of the monetary powers of the United States, seems well disposed. The House has already passed the Fed Oversight Reform and Modernization Act, which is now before the Senate. The House is preparing to fold that bill into a new, improved version, called the 2016 Choice Act. The measure passed on Tuesday the Financial Services Committee, which means that whoever it is that Mr. Greenspan was referring to when he fretted about the “crazies” could well have to reckon with reality one way or another come November.