Wednesday, March 28, 2012

Timberlake for Fed Chairman!

There was I, gliding along as unconcernedly as a seagull through an article about Ben Bernanke and the gold standard when I got that Timberlake feeling.

No, not Justin Timberlake and the "reveal."  The Other Timberlake.

What knocked me for a loop was this from Brian Domitrovic:
Milton Friedman’s greatest student in the area of monetary history, Richard H. Timberlake, has written voluminously, and definitively, since 1993, that no evidence exists that the Fed was following gold-standard rules or rubrics when it contracted the money supply from 1928 to 1933.
Uncle Miltie's "greatest student?"  How come I didn't know?  It's not as if I've been hiding under a rock for the last 20 years.  And that's when Richard H. Timberlake Jr. published his Monetary Policy in the United States: An Intellectual and Institutional History: in 1993.

So what, you say.  Uncle Miltie already published a magisterial A Monetary History of the United States, 1867-1960 with his collaborator Anna Schwartz.  What else is new?

But take a look at that title.  1867.  Very nice, and all that, but I would really like a bit of monetary history in the decades before the Civil War.  Specifically, I would like to know a lot more about the monetary mayhem caused by Andrew Jackson and his war on the Second United States Bank leading up to the nasty Depression of the 1830s and 1840s revolving around the Specie Circular.

Well I took a look at the book's Contents, and there is: Chapter 5.  "The Specie Circular and the Distribution of the Surplus."  Oh yes, back then the US had pretty well paid off the National Debt and the big question was what to do about all that lovely money that wasn't needed to fund the debt any more.  We should be so lucky.

Like I said:  How come I didn't know about this?  Well I do now, and I know now that, according to Timberlake, the Fed screwed up in 1929-33 because of the "real bills" doctrine.  That's the notion that the central bank should only discount bills of exchange that finance "real" economic activity--as opposed to investment and speculation.

The result in 1929-33 was that the Fed completely ignored the signals that the gold standard was sending.  The gold held by the Fed soared in the early years of the Great Crash, a clear signal that it should expand the money supply.  But did it?  No.  Instead it sent to the wall banks that were stressed by their investment exposure.

What should you get from this?  Just this.  From its very beginning, the Fed has been an amateur hour, run by political hacks that didn't have a clue what they were doing.  Most of the time, the Fed has been a lapdog for the US Treasury and its need to float its debt--as right now with toy-poodle Little Ben Bernanke.  The result has been that the dollar has shrunk from $20 per ounce to $1,600 per ounce and no end in sight.

More and more, we are seeing that the Progressive governance structure of the last century has been an utter, incompetent failure.  It's not that the Progressives have been corrupt.  They have, but what of that?  It's not that they have pushed bad ideas.  They have, and everyone has a right to push a bad idea or two.  The intolerable thing is their incompetence, and their utter failure to learn from experience.

It's up to us conservatives to put this incompetent ruling class out of business and restore America to its glorious freedom.  It can't come too soon.

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