Central Bankers are Useless

Wikileaks is all very well. But who needs to know that the Arab rulers in the Middle East are more pro-US than they like to let on, or that they are afraid of Syria and Iran. We knew that. We just didn't know the words they used.

We also know that good old Arthur Burns, Chairman of the Federal Reserve Board from 1969-74, was a pushover who let President Nixon push him around and inflate his way to reelection.

Now we have the old-fashioned equivalent of WikiLeaks to tell us.

It turns out that Uncle Arthur penned a diary in spiral-bound notebooks during his years in Washington, DC. His widow gave the notebooks to the Gerald Ford Presidential Library, and now we have Inside the Nixon Administration: The Secret Diaries of Arthur Burns edited by Robert H. Ferrell.

The diaries don't tell us anything new. We already knew that Arthur Burns was a pushover. It's made pretty obvious in bouncing titles like A History of Central Banking in Great Britain and the United States by John H. Wood.

In fact Central Banking shows pretty conclusively that 20th century central bankers were mostly completely useless bureaucrats. In the US there were only two that were any good. William McChesney Martin had his moment when he won the Fed vs. Treasury battle in the early Fifties by raising interest rates to end the accommodative policies during World War II. And Paul Volcker stopped the Seventies rot with bar-tight monetary policy to break the Nixon-Ford-Carter inflation.

The most useful commentary on monetary policy since the government gave us the Federal Reserve Board is that the dollar, worth about 1/20th of an ounce of gold in 1913, is now worth about 1/1400th of an ounce of gold. Here's another benchmark. When Uncle Arthur bought his spiral bound notebooks back in 1970 they cost $0.49. Today the notebooks cost $4.95. That makes today's dollar worth about ten cents in 1970 dollars. Thanks to our brilliant central bankers.

One of the justifications for our current policy of "mild" inflation is that it helps prevent meltdowns like the Great Depression of the 1930s and the frequent financial panics of the 19th century.

That's nice to know.