Last week, Americans woke up to some telling results from the New Hampshire primary. But while the media’s attention seems to have focused on Bernie Sanders’ growing competitiveness over Hillary Clinton or the GOP's crowded horserace, the real surprise is that, the candidates that finished ahead in Iowa and New Hampshire, and are projected to top South Carolina’s February 20th primary are all proponents of sound monetary reform. So are Americans sending a signal to Washington?
Let’s take a look at three GOP candidates with the strongest performances thus far.
Donald Trump: 2nd in Iowa, 1st in New Hampshire, 1st in South Carolina (forcasted)
There is a lot to be said about Donald Trump and his less than savory campaign, but one thing that should be noted is that he has put a lot of thought into the monetary policy question. In an interview with Bloomberg's With All Due Respect, Donald Trump lauded Paul Volcker, the former Federal Reserve Chairman who helped lower inflation from 13.3 percent in 1979 to 3.2 percent in 1983, claiming that he admired the fact that the former Chairman was more concerned about inflation than full employment.
While many economists might cringe at the thought of Volcker’s time on Constitution Avenue, one thing that can be said is that he understood the importance of the money supply. More notably still, perhaps, he was aware of the fact that pursuing both full-employment and price stability through monetary policy, is misguided, or as he put it “operationally confusing and ultimately illusory.”
As Volcker stated in a 2013 piece in The New York Review of Books:
The Federal Reserve, after all, has only one basic instrument so far as economic management is concerned—managing the supply of money and liquidity. Asked to do too much—for example, to accommodate misguided fiscal policies, to deal with structural imbalances, or to square continuously the hypothetical circles of stability, growth, and full employment—it will inevitably fall short. If in the process of trying it loses sight of its basic responsibility for price stability, a matter that is within its range of influence, then those other goals will be beyond reach.
But while Chairman Volcker seems to understand the deep-rooted problems with the Fed’s misguided “dual-mandate,” Janet Yellen’s current regime clearly does not.
As Judy Shelton, Co-Director of the Sound Money Project notes in The Hill, “Though Fed officials desperately cling to their presumed statutory mandate as a way to rationalize their government agency’s existence, it’s time to recognize that it stems from an era when government management of the economy was seen as a good thing — and the Fed was meant to follow orders.”
In typical fashion, Trump finished the Bloomberg interview by saying that, as a businessman, he likes low interest rates, but reminded his audience that “from the country's standpoint, I'm just not sure it's a very good thing, because I really do believe we're creating a bubble."
Ted Cruz: 1st in Iowa, 3rd in New Hampshire, 2nd in South Carolina (forecasted)
While a lot can be said about Ted Cruz, one thing is for certain: he has a deep-rooted commitment to sound money and monetary reform. But considering that his campaign necessarily depends on the support of the evangelical community, this really comes as no surprise. Money is, after all, a profoundly moral matter that is discussed in the bible and has been contemplated by Christian scholars since.
In Deuteronomy, for example, there is an emphasis on the importance of carrying “accurate and honest weights and measures.” Noting that money is our most basic unit of account, one can quickly see the relevance of such a passage. Similarly, Catholic theologian Juan de Mariana (a forerunner of the Enlightenment) wrote at length about the morality of sound money, noting that the minting of lesser-quality coins by the state should be qualified as “infamous systemic robbery.”
With this in mind, it becomes clear why he was the first candidate to stand up for monetary reform during the debates, coming out in support of Rand Paul’s audit the Fed legislation, slamming discretionary, experimental monetary policy and noting that “the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability.”
Marco Rubio: 3rd in Iowa, 5th in New Hampshire, 3rd in South Carolina (forcasted)
Since Rubio arrived in Washington in January of 2011, he has taken a strong stance against big government programs such as Dodd-Frank and ObamaCare. Yet perhaps his most notable contribution to the sound money movement (while unbeknownst to most) was his 2013 opposition to the appointment of Janet Yellen as Federal Reserve chief. In a statement, Rubio noted that he would not be voting for Yellen “because of her role as a lead architect in authoring monetary policies that threaten the short and long-term prospects of strong economic growth and job creation” and claimed instead that she “has championed policies that have diminished people's purchasing power by weakening the dollar… and put the U.S. economy at increased risk of higher inflation and another future bust.”
Furthermore, Rubio called for the Fed to “publish and follow a clear monetary rule that will help provide greater stability about prices and what the value of a dollar will be over time.” Such a rule would prevent miscommunications from the Fed and signal to investors that the Fed has a clear strategy and understanding of present market conditions. The lack of such a rule, on the other hand, inevitably leads to resource misallocations and mal-investments.
Noting that Rubio is a member of the Senate Committee on Small Business and Entrepreneurship, it becomes clear why he would be in favor of a rule that would make the Fed a bit more predictable. That could very well be why he has already said that as President he would not renominate Chairwomen Yellen in 2018.
While the road to Election Day is long and unpredictable, advocates of sound money should see a glimmer of hope in the Iowa and New Hampshire results. While the candidates are far from perfect, they do seem to understand that a prosperous future necessarily depends on the soundness of our monetary system. As we continue to choose our candidates, we should try and remember that our country needs a leader in office that is wiling to fight for the dignity of our currency and champion the idea that discretion cannot create wealth, at least not for those who need it most.