Letters to the Editor
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 Golden Why’
I have really been surprised by The New York Sun’s editorials about the gold standard [“The Golden Why,” January 13, 2006].
The large inflation that you suggest was caused by the abandonment of Bretton Woods was actually spurred by Arthur Burns, who as chairman of the Board of Governors of the United States Federal Reserve, pumped up the money supply under the misguided belief that an “incomes policy” – also known as wage-and-price controls – could hold back the inflation.
We got a pumped-up economy in time for President Nixon’s reelection, but wage-and-price controls didn’t work. The economic distortions became too much, and when the controls came off, inflation rose.
The problem got worse when President Carter pursued full employment at any cost with another Fed chairman willing to spur monetary growth.
With inflation soaring, interest rates followed suit, and mortgage rates hit 20% or more. Finally, Mr. Carter had no choice and appointed as Fed chairman Paul Volcker, who restrained monetary growth.
President Reagan accepted Mr. Volcker’s approach and was willing to endure the necessary and temporary surge in unemployment (the 1982 recession). Inflation ebbed.
Chairman Alan Greenspan, who followed Mr. Volcker at the Fed, continued the same policy and we have enjoyed unusual price stability ever since. A stable price level is the best path to high productivity and solid employment growth.
DAVID M. O’NEILL
Manhattan
Mr. O’Neill is an adjunct professor of economics at Baruch College of the City University of New York.
