A view from America …
The growth gap of the current recovery compared to an average recovery is $1.3 trillion below normal. (Trillion. With a t.)
Current private sector unemployment is nearly 4 million jobs short of an average recovery at this stage. If the labor force participation rate — people who are working or seeking to work — had not collapsed the unemployment rate would be 10.6% rather than 7.4%.
As Joint Economic Committee chairman Rep. Kevin Brady (R-TX) observed: “[S]ince [President Obama’s] taking office only two million more Americans have found a job while 15 ½ million have gone on food stamps. Putting seven people on food stamps for every person that finds a job isn’t the way to strengthen the middle class.”
Such a punk recovery is disheartening, even shocking. Most of all it’s bewildering. Most elements of macroeconomic policy have not changed much (although there has been serious erosion recently) since the days of Reagan through Clinton. That was a policy mix that created millions of good new jobs and sustained a growth rate sufficient to create a federal budget surplus. Still, no growth. Yet while most policy variables have remained constant, one — monetary policy — has changed, and dramatically.
America’s thought leaders, of both parties, are beginning to wonder. Could monetary policy be the primary culprit behind the growth gap?
The latest entrant to this search for the culprit (and the solution) is the Conservative Action Project (to which this columnist belongs). It is expected to call, as early as today, for a national monetary commission to get to the bottom of this. The Conservative Action Project (CAP) is an influential coalition of conservative thought leaders chaired by President Reagan’s counselor, and Attorney General, Edwin Meese III, and by former Congressman and Bradley Foundation genius award winner David McIntosh. “Participants include the CEO’s of over 100 organizations representing all major elements of the conservative movement—economic, social and national security.”
The Center for American Progress — the left’s CAP — sets the Democratic Party’s social democratic policy agenda. The Conservative Action Project — the right’s CAP — sets the Republican Party’s free market, classical liberal, policy agenda. And the Conservative Action Project is expected to release today one of its occasional Memos for the Movement. It is expected to declare:
“Among the critical agenda items that the Conservative Action Project has identified for the 113th Congress is a call to ‘establish a national monetary commission to review the likely outcomes of principled monetary policy prescriptions.’ This directly tracks a plank in the 2012 national GOP Platform calling for a ‘commission to investigate possible ways to set a fixed value for the dollar.’ The Constitution, in Article I Section 8, gives the power exclusively to the Congress to ‘coin money, (and) regulate the value thereof.’”
It is worth noting that Rep. Marsha Blackburn (R-TN), co-chair of the Republican National Platform Committee, widely is considered the godmother of the monetary commission plank, a plank which memorably resonated throughout the world media.
The CAP is expected to call upon Congress to “pass legislation to create a monetary commission to examine how our monetary policy effects economic growth. … Conservative leaders and organizations should support monetary policy reform that is consistent with free-market, limited-government, constitutional principles.”
The draft Memo — which is more of a Manifesto — describes the issue this way:
“A century after the creation of the Federal Reserve, and decades after Congress gave the Fed their ‘dual mandate’ for both price stability and full employment, many policy makers have rightly called for a re-examination of our monetary policy. Especially in light of the extraordinary actions of the Federal Reserve during the financial crisis since 2008, there is strong need for such a review.
“On March 14th, Rep. Kevin Brady (R-TX), chairman of the Congressional Joint Economic Committee, together with 12 original co-sponsors, introduced legislation, which calls for establishing a commission to ‘examine how United States monetary policy since creation of the Federal Reserve has affected the performance of the U.S. economy in terms of output, employment, prices, and financial stability over time.’
“Such a commission would provide an invaluable opportunity to examine the role that monetary policy under Presidents Bush and Obama has played and continues to play in historically low economic growth and historically high unemployment, as well as in in Washington’s failure to facilitate an economic climate in which abundant money is available at affordable rates to working and middle class families with good credit. As demonstrated by President Reagan, good monetary policy is as crucial to economic growth as is good tax, spending, trade, energy, and regulatory policy.”
Notably signing this memo are some of the most influential and respected movement conservative leaders. The list is far too long to include in full but includes heavyweights such as Grover Norquist, head of Americans for Tax Reform, Chris Chocola, president of the Club for Growth, Brent Bozell, Chariman of ForAmerica, the Honorable Becky Norton Dunlap, former Reagan White House advisor, the Honorable Jim Miller, former Reagan OMB Director, the Honorable T. Kenneth Cribb, former Reagan domestic policy advisor, the Honorable Alfred Regnery, the Honorable J. Kenneth Blackwell, Tony Perkins, president of the Family Research Council, Colin Hanna, president of Let Freedom Ring, Al Cardenas, president of the American Conservative Union, Jenny Beth Martin, co-founder of the Tea Party Patriots, Amy Kremer, president of the Tea Party Express EXPR -1.77%, philanthropist Bill Walton, Gary Bauer, present of American Values, Phil Kerpen, president of American Commitment, Jim Ryun, chairman of the Madison Project, Myron Ebell, president of Freedom Action, Ron Robinson, president of Young America’s Foundation, Chuck Cooper, Mallory Factor, Peter Ferrara, Mario Lopez, Andy Blom, and Dan Oliver. (And this columnist as well.)
Rep. Brady’s legislation to assemble a bipartisan, bicameral, commission to study the impact of monetary policy, under various past and proposed policy regimes, is not, in and of itself, a “conservative” proposal. It’s simply good governance. 25 co-sponsors have enlisted, including a first Democratic co-sponsor, Rep. John Delaney (D-MD), a truly significant Democratic Party thought leader.
According to a poll of over 1,000 voters by Scott Rasmussen conducted about two years ago, the most enthusiastic constituencies for good money (at least the version represented by the gold standard per Rasmussen’s formulation) are not conservatives, Tea Partiers, or even libertarians (who registered strong plurality support). They are African-Americans and labor union members — two core Democratic constituencies.
Good money is not a partisan issue. Empirically studying what makes money good is not an ideological exercise. The members of the right’s CAP, the Conservative Action Project, should, in this context, properly be seen as civic rather than ideological thought leaders. This columnist hopes that the left’s CAP, the Center for American Progress, will show the statesmanship to pause from the inevitable skirmishing over the debt ceiling to join in the call for co-sponsorships for the legislation constituting a bipartisan Monetary Commission introduced by Chairman Brady.
Millions of good new jobs, trillions in new national wealth, and the ensuing plummeting deficit that good money can provide is worth putting aside partisan differences. Passing legislation to permit a drilling down to bedrock facts is the highest and best use of the 113th Congress’s time. And it is a “critical agenda item” of the Conservative Action Project for the 113th Congress.
Republican or Democrat, Conservative or Progressive: good money is good policy and good politics. Time to charter a serious commission.
This article was previously published at Forbes.com.
The United States Constitution (Article One, Section Eight) gives the Congress the power to coin money – if it wants to, it does not say that Congress must do so or that it must establish a monopoly.
Till the government ban in the 1850s private mints dominated the West – producing reliable gold and silver coins (producers would take gold or silver to these mints who would be paid by a tiny fraction of the metal, using the rest to mint coins). There was no good reason for the government ban on private mints (no wild debasement or other fraud), the government just did not like COMPETITION.
As for the idea that monetary policy can reduce unemployment (and so on) – it can for awhile, but these “fixes” (like those of a drug addict) wear off. After all with the present “cheap money” policy (interest rates at near zero for year after year) if monetary policy could fix unemployment then there would be full employment already.
Whether it is the credit bubbles of bankers (where bankers pretend that CREDIT is MONEY – which it is not), or phony “standards” (where establishment people give-the-impression that their notes represent gold or silver, or whatever the “standard” is, when really they do NOT), or the government printing press (producing fiat-command money whose dark value is based upon legal tender laws and tax demands) this “monetary expansion” game CAN NOT reduce unemployment and welfare dependency.
Want to reduce unemployment? They FREE THE LABOUR MARKET – got rid of the government regulations (such as the pro union regulations) that prevent the labour market “clearing”.
Want to reduce welfare dependency? Then get rid of the schemes that (as Charles Murray showed in “Losing Ground” ) have UNDERMINED progress in reducing poverty.
The “masses” were not starving in the streets of American cities before “Food Stamps” and so on were pushed on people from the mid 1960s onwards (and it is “pushed” – there are vast propaganda campaigns to get people dependent on these government schemes).
Printing more money (whether it is by the Federal Reserve or the Congress) is not the answer – freeing up the labour market and radically reducing government taxes and government spending THIS is the answer.
Monetary policy is (too often) “free lunch” economics and, in the end, it does not work.
A price (whether for labour or an exchange rate between currencies – or anything else) is a voluntary agreement between buyer and seller based on honest information about what the good or service actually is. For example, the true price of a Dollar (in terms of Pounds and pence) is what someone is prepared to pay for a Dollar (not a government edict trying to “fix” the exchange rate) and the price of labour is what buyers and sellers voluntarily agree (not what governments or GOVERNMENT BACKED union thugs try to ENFORCE).
When people think they think they have gone “beyond” ordinary human reason (the rules of basic logic) they have really fallen BELOW it (not gone above it).
For example, a gold (or some other commodity) “standard” where establishment people pretend (give-the-impression) that their notes represent gold (or whatever the commodity is) when they, in fact, DO NOT HAVE this gold – this does not work (there is no magic wand or free lunch and people who push such phony “standards” as way of painless monetary expansion are selling snake oil).
The basic logic point that the commodity “is either the money or it is not the money” can not be denied – other than by “intellectuals” (and I do not use the word as a complement). People who believe they have gone “beyond” human reason, and have (as I point out above) actually fallen below it. Fallen into free lunch, prosperity via the printing press (or the banker credit bubble) fallacies.
What works is thrift (real savings – not credit bubbles that intellectuals pretend are real savings) and hard work. Hard work in a FREE MARKET – and, tragically, the Western world is a vast distance from a free market.
In one of many books I read the past few years, the author opined that the Founders, who were aware of paper money, chose ‘coin’ deliberately in order to emphasize that our monetary system was to be based on precious metals. After all, it is quite difficult to coin paper, though I have seen some made from cardboard.
The current state of affairs is consistent with the deliberate policies enacted by the current administration at the behest of the left’s CAP which after all is funded at least in part by one of the U.K.’s most beloved hedge fund managers whose initials are G S. I personally think his ‘philanthropy’ is selfishly pointed towards collapsing the U.S. dollar. His legend says that he made over a billion dollars off one FOREX trade in which he shorted the British pound. Imagine, how much he could score by a similar trade based on the collapse of the World’s Reserve Currency. If the right’s CAP believes it can work with that of the left, I wish them luck, but shall not hold my breath awaiting a positive result.
The hand wringing over unemployment fails to account for the fact that things change. For instance, we no longer live in a tribal or feudal society. We don’t get up every morning and march out to weed the baron’s turnips in exchange for protection from the margrave’s thugs. Does any sentient being believe that the current management/labor symbiosis will endure far into the future? Additionally, the current slow growth in jobs is indicative that business feels no need to hire incompetents that add nothing to their bottom line. Many of the unemployed are in that fix for a reason, they fail to produce an equivalent or more than the wage they wish to receive.
The world needs America as the worlds reserve currency, at least for the moment, to be the one to act first, all other currencies one way or another end up being forced to track it, and it certainly gets to play a few dirty tricks by exporting its inflation. Milton Friedman in the 1980’s opined ‘There has not yet been enough public outrage at inflation’ Well, like most things, I suppose it does take a crisis for things to get resolved.
Additionally, the current slow growth in jobs is indicative that business feels no need to hire incompetents that add nothing to their bottom line.
That has always been the case but is not any more pronounced now than in the past. The current slow growth in jobs is more indicative of business’s well-placed fears of the future policies of our incompetent federal government.
Quite so Mr Thompson.
“Not worth a Continental” was the attack on the paper money of the “Continental Congress” – indeed the basic point of the Constitutional Convention was to get AWAY from this (although the history books do not to tell people that).
No State may have anything other than “gold or silver coin” as legal tender (Article One Section Ten) and the Congress has the power (if it chooses to do so) to COIN this money (Article one Section Eight). As part of the “weights and measures” section of its powers (alternatively it can just check that private mints are not debasing the coinage – although if they did that their business REPUTATION would be destroyed).
The dishonesty of people who demand “Constitutional money” yet are really demanding MORE funny money (not an end to funny money) is profound.