Right On The Money At The Cato Institute

Posted: Jul 31, 2013 12:01 AM

Lewis E. Lehrman, founder and chairman of The Lehrman Institute (with which this columnist has a professional association as editor of the Institute’s web-publication) recently presented to acclaim at the Cato Institute, in Washington, DC, his latest book, Money, Gold and History.  The Hayek auditorium was well filled. C-SPAN taped the event for broadcast.  Cato livestreamed it (archived and available here).

This was no ordinary event.  It may, in retrospect, be seen as the gold standard’s Woodstock.  Perhaps a more apt metaphor is the Velvet Underground’s first record.  As Brian Eno famously observed, “I was talking to Lou Reed the other day and he said that the first Velvet Underground record sold [only] 30,000 copies in the first five years. … I mean, that record was such an important record for so many people. I think everyone who bought one of those 30,000 copies started a band!”  Cato staged what may prove to have been something comparably seminal.

Some of the most eminent voices for monetary reform today — all justly to be considered part of monetary policy’s “Velvet Underground” — participated.   Present were Cato’s president John Allison, Cato’s Director of Financial Regulation Studies Mark Calabria, moderator; Cato’s Vice President for Monetary Studies, Prof. James Dorn; Cato senior fellow (and editor of Forbes.com Opinions and RealClearMarkets) John Tamny; Cato senior fellow Alan Reynolds (who, among many other notable accomplishments, coined the term “Supply Side economics”); and Cato’s director of government affairs Laura Odato.

Also prominent were the eminent Dr. Warren Coats; Jeffrey Bell, policy director, and Rich Danker, economics director, of American Principles in Action (with which this columnist has a professional association); The Ethics and Public Policy Center’s John Mueller; Atlas Economic Research Foundation’s Judy Shelton; Mercatus Center’s program manager for its Financial Markets Working Group, Lydia Mashburn; Ron Paul’s Campaign for Liberty vice president for policy Norman Singleton; Howard Segermark, Director of the Committee for Monetary Research and Education; Ohio-based monetary reform advocate Rich Lowrie; and Jonathan Decker, managing editor of thesupplyside.  Key Congressional staff members and other policy thought leaders attended as well.  (Missing, but surely there by proxy or in spirit, were gold standard advocates Steve Forbes, APIA Chairman Sean Fieler, and Prof. Lawrence White of George Mason University.)

From the Fourth Estate, Addison Wiggin, of the parent to the Laissez Faire Book Club (which is making Lehrman’s earlier success d’estimeThe True Gold Standard, available to its members) introduced Lehrman. Also present were R. Emmett Tyrrell, founder and editor of The American Spectator, and William Kristol, founder and editor of The Weekly Standard.

It was striking to see an iconic conservative lamb, Tyrrell, and an iconic neoconservative lamb, Kristol, (not to mention an iconic social conservative lamb, Bell) laying down with so many iconic libertarian lions.  This is a sign, if not exactly of the millennium, that that the gold standard may have the power to unite, somewhat, the fractious factions of the conservative movement.

And to avert your understandable anxiety, dear reader, Tyrrell, Kristol and Bell survived the encounter, hospitably received. Perhaps a few swords will be beaten into ploughshares.   (How Bill Kristol might react to such a subversive proposition is an open question.  Still… united we stand.)

As Cato publicized the event at Cato.org,

“Lewis E. Lehrman, President Ronald Reagan’s gold commissioner and co-signer of the iconic commission minority report, The Case for Gold, will make a rare Washington, D.C., public appearance to debut his latest work, Money, Gold, and History. In his new book, Lehrman, founder and chairman of the Lehrman Institute, compiles many of his key writings from almost 40 years of publications and complements them with new and important essays on the classical gold standard. Among the works included are his testimonies at the request of former representative Ron Paul before the House Subcommittee on Domestic Monetary Policy, his address before the Parliament of France, and many essays in leading publications, including the Wall Street Journal, the American Spectator, and the Weekly Standard. Lehrman, a student of iconic French economist Jacques Rueff, and author of the critically acclaimed book The True Gold Standard, is a preeminent advocate of restoring a modern classical gold standard.

Lehrman’s remarks were striking.  Perhaps most heartening was his conclusion, one in accord with another gold standard titan: Steve Forbes.

As the gold standard continues to emerge as a respectable, even compelling, public policy option competing schools of thought emerge.  These range from the great Ron Paul’s (and APIA chairman Sean Fieler’s) prescription for choice in currencies, a la Hayek, to Lehrman’s prescription of the classical gold standard, a la America’s statesmen, toForbes’s proposal of a “goldless gold standard” in which “If the price of gold were to go above that, the Federal Reserve would sell bonds from its portfolio, thereby removing dollars from the economy to maintain the $1,300 level. Conversely, if the gold price were to drop below $1,300, the Fed would ‘print’ new money by buying bonds, thereby injecting cash into the banking system.”

Competing currencies (a la Hayek), defining the dollar as a fixed weight, and convertible into, gold (a la Lehrman), or having the Fed buy and sell bonds based on movements in the price of gold (a la Forbes) suggest some material differences.  Both Forbes and Lehrman are statesmanlike in encouraging an empirical review and intelligent discussion of the various proposals. Forbes:

“Just as there are many variations on democracy, there are also various–and legitimate–types of gold standards. … There have been permutations of the gold standard.”

Lehrman, in summation, took a comparable, generous, stance by posing the question “what is to be done?” rather than prescribing the classical gold standard.  Now is a time for discourse.  Lehrman:

“Since the end of convertibility in 1971, average real wages per hour of work in the United States have been stagnant. Average annual American economic growth since 2000 has been about half the average annual real growth of the previous two American centuries.  The real purchasing power of a 1971 dollar saved in the bank, adjusted by the CPI, has declined to a value of about 15 cents.  That is to say, the price level has risen from 1971 to 2013 by about six-fold, a rise unparalleled in the history of the American Republic.  In a word the American middle class, relatively speaking, has been gradually dispossessed.

“The consequences of the collapse of real money worldwide are still unfolding.  But let it be said that only one century of post-World War I financial disorder has been written.

“And now, the question is: what is to be done?  So let us move forward to our discussion and let us inquire together what is to be done.”

What, indeed, is to be done?

“Let us inquire together.”

The Centennial Monetary Commission legislation sponsored by Rep. Kevin Brady (R-TX), chairman of the Congressional Joint Economic Committee, now has gained 23 co-sponsors (up from an original 12) and steadily is gaining more.  It is perfectly fitted to carry out this mandate.  Lehrman, in his remarks, prominently endorsed this legislative initiative.

This bi-partisan, bicameral, commission is structured to conduct a broad-based look at monetary policy.  It is by no means a “gold commission.”  The gold standard is but one of six regimes to be thoroughly examined.  Such a forum would provide the proponents of the varietals of gold standard regimes a dignified opportunity to present their empirical analysis and recommendations.   Proponents of the current fiduciary management, of rules-based management, of NGDP-targeting, price level or interest rate targeting, similarly would present the evidence for their preferred systems.

Such an empirically based commission would be an optimal forum for all who care about the impact of monetary policy. Given money’s potency, everybody, especially every elected official, and recently recommended by Sen. Rand Paul, ought to care.

The gold standard, for very good reasons, has the burden of proof.  Yet if, through proponents as erudite as Lehrman, it carries that burden the gold standard could emerge from review to be seen as the “gold standard” of monetary policies.  If that happens historians may well look back to the July 18, 2013 gathering at Cato Institute as having produced, just as Eno referred to the Velvet Underground’s first album, “such an important record for so many people.”

“Let us inquire together.”