It's funny how the GOP now a days is against everything they once stood for. I mean we got of course Romney running against his own health care bill and forcing out Richard Grenell who was a high ranking foreign policy official under Bush II.
We can look back at a further remove from history and note that the party of Lincoln has long since become the party of Lynchin'. Now today Herman Cain showcases another aspect of today's GOP-they've become "hard money" fanatics. Ron Paul seems to have rubbed off on the party and there's been no effort to quarantine.
With the GOP leaving all it's previous ideas behind it's amazing that their now even repudiating Milton Friedman-it was he as much as anyone who urged Nixon to get off it in the early 70s.
So you have crazy gold bills in the House and in GOP state legislatures-notably in Kansas and Utah. Now you have Herman Cain with an op-ed in today's Wall Street Journal-this is a pretty high profile piece, in other words. The WSJ editorial page is essentially the Republicans state propaganda organ, it's Ministry of Information.
Here goes Mr. Cain advocating gold. Recall some of the other things he advocated like discrimination against Muslims in his Administration or deeply regressive tax rates in his famous 9-9-9 flat tax. Cain actually plays the Karl Rove playbook of tyring to make his weakness-a regressive tax proposal-his strength:
"My 9-9-9 tax code replacement plan provoked enormous enthusiasm during my presidential campaign because it represents the largest transfer of power in the history of the republic. By instituting a 9% income tax, a 9% business tax, and a 9% national retail sales tax—and eliminating most of the remaining tax code (including the many hidden taxes built into the process of doing business)—we would simplify the system for everyone and rob politicians of their ability to use the code to manipulate economic activity."
http://online.wsj.com/article/SB10001424052702304070304577395891113592150.html?mod=WSJ_Opinion_LEADTop
Well he's certainly right about it being the largest transfer in history but in the wrong direction. He recommended eliminating most of the remaining tax code for the rich it's true. He had the Supply Sider's delight of eliminating almost all of taxes on capital. However he also created a new national sales tax of 23%. When you consider that the media American pays more than 7% in a state sales tax you see that he actually would give us a sales tax over 30%. If by "rob politicians" he means "rob us" and give the loot to the rich then that's very accurate.
"But why stop there? Washington thwarts prosperity through more than the tax code. The present monetary system is an abysmal failure by any objective measure. As the former chairman of the Federal Reserve Bank of Kansas City, I can say with firsthand experience that it is not the people of the Fed, but the actual structure, that needs reform. Our liberty and prosperity depend on it."
"Think of economic growth as the result of two gears operating together—low tax rates and sound money. When both gears are fully engaged, the economy moves forward. When the gears become disengaged, the middle class suffers. That's why, as convinced as I am of the power of the 9-9-9 concept, we need sound money to go with it."
I'm actually kind of glad he mentions gold advocacy in the same breath as 9-9-9, it hopefully shows even those benighted liberals who admire Ron Paul that gold buggery is a dead end.
"However imperfect a gold standard may be, it remains the best among all alternatives. The empirical data for both the classical gold standard, which I favor—and even the flawed "gold-exchange" standard, as we had under the Bretton Woods system—are impressive. Economic growth was stronger, unemployment rates lower, the price level more stable, and recessions less frequent and less severe than under the present system."
Again for those of you liberals who insist on believing there's something progressive about the gold standard listen closely to why he advocates gold bugging:
"I realize the Washington establishment goes ballistic at this suggestion. Gold is kryptonite to big-spending politicians. It is to the moochers and looters in government what sunlight and garlic are to vampires. The American people are another story. Nearly half (44%) support a return to a gold standard, according to an October 2011 Rasmussen Report. That support soars to 57% when respondents know it will "dramatically reduce the powers of bankers and the political class to steer the economy."
It's yet another way of imposing austerity-which is a way is like Sumner. Don't get more wrong I think the gold standard stuff is just bunk whereas the NGDP idea is at least deeply thought provoking but it's another way of using monetary policy to impose austerity. In a Herman Cain Sound Money universe it would mostly served to make us all very poor.
Indeed Cain even mentions a hard money GOP bill in Congress:
"In Congress, Rep. Kevin Brady (R., Texas) recently introduced the Sound Dollar Act of 2012, and Sen. Mike Lee (R., Utah) introduced its Senate counterpart, the Federal Reserve Modernization Act. While each bill stops short of the real thing, which is a return to the gold standard, they are major first steps."
Incidentally note that there's a big difference between the "flawed gold standard" of Bretton Woods and the "Classical Gold Standard" Cain favors. The latter gave us a very unstable monetary system where we were in recession roughly 20 of those 40 years (1873-1913) and we had bank panics every 3 years or so.
"we were in recession roughly 20 of those 40 years (1873-1913) and we had bank panics every 3 years or so."
ReplyDeleteYou were not. The nonsense about the long depression of 1870-1900 stemmed from the inability of Keynesian and Monetarist economists to understand how an economy can be prosperous and in the same time experience a steady decline of the general price level (which is a normal state of affairs under the gold standard). the period you are talking about was a time when America was rapidly industrializing, with an enormous rise of the standards of living, a precipitous decline of costs of production, and an average real GDP growth rates of about 5%.
And bank panics were not caused by gold standard, but by the departures from it, in the form of allowing the fractional reserve banking, a deposit currency NOT covered 100% by gold, various government privileges to the banks that included suspensions of payments, and various forms of government regulations that restricted the ability of American banks to raise capital and be more resilient in the face of financial squeeze, primarily the so called "branch banking" by which the banks were allowed to have just one office in a state. Canada, which did not have a central bank until 1934 did not experience almost any banking panics during the 19th century. And it was on the same classical gold standard as USA.
And, in addition, as some newer studies have shown (Selgin et al) the intensity of financial crises and recessions was greater in the period of Fed than before the Fed. The only reason why you don't have the classical bank panics nowadays is the government deposit insurance, which creates an enormous moral hazard by protecting the banks from the market discipline and giving the shareholders and savers no incentive whatsoever to think about where they invest or deposit their money (they know the government, i.e. the taxpayer is going to come to rescue if things go South).
Ivan Janokivic. First of all thanks for dropping by. You have a very formiddable name. I almost feel like I've heard it before.
ReplyDeleteNot Ivan the Terrible that's not it. Though you might like his monetary policy I suppose.
Ivan. I didn't say there was one long recession between 1870 to 1900 just many samll ones that averaged roughly one out of every two years.
I'm not familiar with your claim that GDP was 5% per year. Of course we can argue over causation and correlation but the gold standard thing is at this point nothing but nostalgia.
I did check out your website-as the name so impressed me-and what I see is that you're a guy of very conservative cast. You consider Lincoln a great villian while you admire Andrew Johnson for refusing to sign the 14th Amedment.
For most people today that's enough to at least ask the question-do you still have a problem with Black people. Now I do apologize for being so dead on about it but the question begs.
So maybe you like gold as in your mind its connected with the kind of social relations you prefer? And I do think there's something to that-the demand for a gold standard is part and parcel of a larger reactionary Right wing agenda.
Incidentally it seems to me you make the case for FDIC better than anyone:
"The only reason why you don't have the classical bank panics nowadays is the government deposit insurance, which creates an enormous moral hazard by protecting the banks from the market discipline and giving the shareholders and savers no incentive whatsoever to think about where they invest or deposit their money (they know the government, i.e. the taxpayer is going to come to rescue if things go South)"
Well I think moral hazard is still preferable to bank panics every three years. In that sense a little moral hazard is a very small price to pay.
"Ivan. I didn't say there was one long recession between 1870 to 1900 just many samll ones that averaged roughly one out of every two years."
ReplyDeleteYes, and the real GDP growth of 4.7% per year. Whereas in the glorious Fed period 1929-1960 you had also a recession every two or three years and the real growth of 2.5 % (during the peacetime years). Was the gold standard responsible for that as well?
"Well I think moral hazard is still preferable to bank panics every three years. In that sense a little moral hazard is a very small price to pay."
So, you would rather prefer, instead of financial crises and recessions every three years in which the big banks are punished for their reckless investment, the financial crises and recessions every three years in which the big banks are protected from the market and bailed out by 99%. I thought you progressives were against the Wall Street and for 99%. But it seems now that you are ready to throw the small guy under the buss only to aggrandize the power of big government and secure the profits of corporate fat cats.
By the way, Ivan the Terrible would not have liked the gold standard at all. All tyrants in human history would have done away with gold first. From the Roman emperors to the likes of Adolph Hitler, Vladimir Ilic or FDR the tyrants were debasing the coins, banning gold or printing money (in modern times) in order to fund their lavish expenditures. Why Ivan the Terrible would be an exemption to that?
Finally, the problem with you leftists is in your slightly paranoid mindset: you simply cannot believe that someone could honestly advocate small government, low taxes and sound money as the worthy principles on their own. S/he must have had some sinister motives such as racism. I assume that you also think Herman Cain hates black people. And Clarence Thomas and Walter Williams as well.
Well Ivan, I don't think it's paranoia, you say you're opposed to the 14th Amendment that outlawed slavery and racial discrimination.
ReplyDeleteYou hate Lincoln who issued the Emancipation Proclamation and ended slavery and you laud Andrew Johnson for oppositng treating black people as equal before the law. Again, no paranoia just looking at your own words.
"Yes, and the real GDP growth of 4.7% per year. Whereas in the glorious Fed period 1929-1960 you had also a recession every two or three years and the real growth of 2.5 % (during the peacetime years). Was the gold standard responsible for that as well?"
Again, I don't know that the GDP was 4.7% cumulatively during this period, you say it was, I'm a skeptic.
1919-60 is a misnomer as you're including the Great Depression in it. If you look at the postwar period-in the FDIC era-that you oppose-we see longer term stability.
I don't know about this idea that all tryants wouuld do away with gold-William Jennings Bryan was against gold and he was not a tyrant but the Great Populist.
"So, you would rather prefer, instead of financial crises and recessions every three years in which the big banks are punished for their reckless investment, the financial crises and recessions every three years in which the big banks are protected from the market and bailed out by 99%. I thought you progressives were against the Wall Street and for 99%. But it seems now that you are ready to throw the small guy under the buss only to aggrandize the power of big government and secure the profits of corporate fat cats."
So you think that a better system would have bank panics every three years? Good luck running for office on that. But to your point Ivan the trouble with your notion of "market discipline" it's not just the banks that suffer under such a system. The whole economy and society does. When there's a bank panic many lose their deposits. You'll have a devil of a time persuading anyone of this.
"you say you're opposed to the 14th Amendment that outlawed slavery and racial discrimination."
ReplyDeleteThe 14th amendment did not abolish slavery, the 13th did. Even less it "abolished racial discrimination". The framers of the 14th amendment excluded the right to vote for the black people and allowed for segregated schools, even in the DC area.
"You hate Lincoln who issued the Emancipation Proclamation and ended slavery and you laud Andrew Johnson for oppositng treating black people as equal before the law."
I hate Lincoln because he imprisoned thousands of political opponents, imposed the martial courts, created ther first concentration camps in American history, abolished the habeas corpus, created the paper money and central bank, was a shameless railroad lawyers. I thought you progressive were for human rights, personal freedom, freedom of the press and the rest of it, judging by your disdain for GWB's infringement upon them.
As for treating the black people as "equal" Lincoln believed that they could enjoy their natural rights, but back home in Africa, not in the USA. Hence he advocated colonization of the blacks to Africa and Caribbeans until his death. And he believed, as majority of Americans in that time that the blacks were inferior race. And he voted repeatedly in the Illinois senate for the draconian anti-black codes.
"1919-60 is a misnomer as you're including the Great Depression in it."
Was not the Fed then in charge? You cannot eat the cake and have it uneaten. If you credit the Fed for causing "prosperity" after World War II you must credit it also for creating the Great Depression. However, even if we exclude the Great Depression the frequancy and severity of the recessions was greater during the Fed period. And remember, even the period before the Fed had a great degree of government intervention and was far from a pure gold standard (as I explained previously).
"Again, I don't know that the GDP was 4.7% cumulatively during this period, you say it was, I'm a skeptic."
If you don't know the data you check. Look at this chart for example.
http://en.wikipedia.org/wiki/File:US-GNP-per-capita-1869-1918.png
In the period
The growth rate for the period 1870-1893 was 4.7% plus declining price level which made it even more pronounced. You can find the data even at wikipedia
http://en.wikipedia.org/wiki/Long_Depression#cite_note-longwave-1-14
"Good luck running for office on that."
I am not running for office. I am trying to convince the reasonable people that the present monetary arrangements are insane and that we need the gold standard for prosperity and progress. That might not be a realistic political option today, but you already had seen a big change in the last few years. Most of the republicans are now at least forced to pay the lip service to the sound money narrative. After all, your progressive agenda was quite a fringe movement in the 19th century, and anyone who would argue against gold and for pure fiat paper money in say 1880 in America would have been and was (rightly) called a crank and lunatic. Things change over time.
"But to your point Ivan the trouble with your notion of "market discipline" it's not just the banks that suffer under such a system. The whole economy and society does. When there's a bank panic many lose their deposits."
Why not give the government bailout guarantees to everyone then? How are the big banks exactly different from the big car companies (sic), or big energy companies, or big farma, or big oil? All of them have a large number of small shareholders who lose money whenever any of those companies goes under? Why are the bank depositors more important than the small shareholders or the owners of pension funds in the big corporations?
Ivan do you know a guy called Major Freedom, writes leaves endless comments of at Money Illusion? You remind me of a guy.... Maybe Aurstirans are all like this.
ReplyDeleteIvan I can be pretty sure that if Herman Cain and the other GOPers are for something it's not in the interests of most Americans.
While there need to be some changes "sound money" isn't the solution it's a big part of the problem. Hard money hurts most Americans certainly those who aren't either bondholders or coupon clippers.
If you understand the historical background of when we got off the gold standard for good in the early 70s there really wasn't much choice. We kept having France and Britian demanding all this gold that was on us to provide them with.
The gold standard may have had its appropriate historical period. That period is gone. I would agree with Cain that the Bretton Woods system was a very good system in its time but there's no real question of "going back."
Our problem isn't loose money.
Is this guy related to weird Al?
ReplyDeleteYou know Major Freedom right? He posts real long comments over at Sumner? He's just like this guy, a simpering gold bug, full blow Austrian and verbiose with a capital V!
ReplyDelete