“The Nobel laureate (Krugman) must have been horrified in September 2010 when, as the value of the dollar was first plunging below a 1,250th of an ounce of gold, Mr. Greenspan warned at the Council on Foreign Relations that “fiat money has no place to go but gold.” Mr. Greenspan is, after all, the author of an essay titled “Gold and Economic Freedom.”…

…Mr. Krugman likes to fault Mr. Greenspan first for failing to foresee the housing bubble and then for worrying about inflation. He contents himself with the quiescence of the consumer-price index while ignoring asset inflation. Mr. Krugman has emerged as an apologist for the Fed and for Mr. Greenspan’s successor, Ben Bernanke, on whose watch the value of the dollar plunged a staggering 53.1% against gold. That’s the second steepest plunge under any Fed chairman; the dollar shed 80.1% of its value under the hapless Arthur Burns from 1970-78. Burns was chairman when we plunged into the age of fiat money after President Nixon closed the gold window that had operated under the postwar Bretton Woods system. How has that worked out? Between 1948 and 1971, unemployment averaged 4.7%. Since 1971 it has averaged 6.4%. Is there a link between high unemployment and fiat money? Meanwhile, Congress is considering measures to tighten the Fed’s leash: a bill that would require the Fed to publish a monetary rule to guide its policy; another bill to audit the Fed, so Congress can look into the formation of monetary policy; another to end Humphrey-Hawkins, the 1978 law that gave the Fed a mandate to work for full employment. Lawmakers are also considering establishing a monetary commission to explore ending the age of fiat money. A year ago Paul Volcker, the Fed chairman who conquered inflation in the 1980s, addressed a conference on Bretton Woods. He didn’t write a prescription, but he didn’t deny the disease either. “By now,” he said, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.””, Seth Lipsky, “A Liberal Speech Cop Targets Alan Greenspan”, The Wall Street Journal

Opinion

A Liberal Speech Cop Targets Alan Greenspan

The former Fed chairman drops out of a monetary conference after he’s assailed by Paul Krugman.

Dr. Paul Krugman Photo: Bloomberg News

By Seth Lipsky

To the list of questions the left has sought to place off limits to open debate—global warming, same-sex marriage, campaign finance, abortion—add a startling new topic: monetary reform. And what a scalp has just been claimed.

Alan Greenspan, who was chairman of the Federal Reserve for nearly two decades, has pulled out of a conference this summer on monetary reform. He did so May 8, two days after the New York Times NYT -0.85 % published a blog post by Paul Krugman labeling Mr. Greenspan the Fed’s “worst ex-chairman ever.”

Mr. Krugman was set off by word that Mr. Greenspan had been billed as one of the speakers for a counter-conference that is set to take place in Jackson Hole, Wyo., in late August, as the Federal Reserve holds its annual retreat there. Mr. Greenspan declined to comment on why he has withdrawn, but the conference’s sponsor, the American Principles Project, confirmed to me that he did so in the wake of Mr. Krugman’s attack.

The conferees plan to continue nonetheless, and just as Congress itself is fermenting on the need to reform the way monetary policy is made. And so the mightiest central bank in the world will be in one conference center, while its critics will gather in another venue down the street. The proceedings of the reformers will be open to the public: a classic teaching moment.

Yet it horrifies Mr. Krugman, who reacted by attacking Mr. Greenspan personally. He derided the former Fed chairman for worrying about inflation, for generally trusting markets, and for voicing opinions on the central bank he once led.

Mr. Krugman also attacked the American Principles Project, whose chairman is a conservative Catholic, Sean Fieler. “The group,” he writes, “combines social conservatism—it’s anti-gay-marriage, anti-abortion rights, and pro-‘religious liberty’—with goldbug economic doctrine.”

Adds Mr. Krugman: “The second half of this agenda may be appealing to Greenspan, a former Ayn Rand intimate—as Paul Samuelson remarked, ‘You can take the boy out of the cult but you can’t take the cult out of the boy.’ But the anti-gay stuff? And helping these people attack his former colleagues?”

“These people”? The American Principles Project was founded by Robert P. George, a distinguished professor at Princeton, at whose Woodrow Wilson School Mr. Krugman is listed as a professor. Mr. George is vice chairman of the U.S. Commission on International Religious Freedom and a former member of the Civil Rights Commission.

Also a religious Catholic, Mr. George has been praised by Supreme Court Justice Elena Kagan for his “profound and enduring integrity.” Where does the Times come off issuing a post referring to one of his institutions as “these people” and not only attacking it for being “pro-‘religious liberty,’ ” but putting that phrase in scare quotes?

The fact is that Mr. Krugman, who has devoted his column inches to plumping for inflation, is scared of critics who comprehend that there is a moral dimension to the question of money.

The Nobel laureate must have been horrified in September 2010 when, as the value of the dollar was first plunging below a 1,250th of an ounce of gold, Mr. Greenspan warned at the Council on Foreign Relations that “fiat money has no place to go but gold.” Mr. Greenspan is, after all, the author of an essay titled “Gold and Economic Freedom.”

Mr. Krugman likes to fault Mr. Greenspan first for failing to foresee the housing bubble and then for worrying about inflation. He contents himself with the quiescence of the consumer-price index while ignoring asset inflation. Mr. Krugman has emerged as an apologist for the Fed and for Mr. Greenspan’s successor, Ben Bernanke, on whose watch the value of the dollar plunged a staggering 53.1% against gold. That’s the second steepest plunge under any Fed chairman; the dollar shed 80.1% of its value under the hapless Arthur Burns from 1970-78.

Burns was chairman when we plunged into the age of fiat money after President Nixon closed the gold window that had operated under the postwar Bretton Woods system. How has that worked out? Between 1948 and 1971, unemployment averaged 4.7%. Since 1971 it has averaged 6.4%. Is there a link between high unemployment and fiat money?

Meanwhile, Congress is considering measures to tighten the Fed’s leash: a bill that would require the Fed to publish a monetary rule to guide its policy; another bill to audit the Fed, so Congress can look into the formation of monetary policy; another to end Humphrey-Hawkins, the 1978 law that gave the Fed a mandate to work for full employment. Lawmakers are also considering establishing a monetary commission to explore ending the age of fiat money.

A year ago Paul Volcker, the Fed chairman who conquered inflation in the 1980s, addressed a conference on Bretton Woods. He didn’t write a prescription, but he didn’t deny the disease either. “By now,” he said, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.”

Good for him. Maybe Mr. Volcker will get invited to join the American Principles Project event in Jackson Hole. One thing we learned about him in the 1980s, when even some of the supply-siders were screaming about his attack on inflation, is that he knows how to stand his ground. He would not be scared off by the likes of Paul Krugman.

Mr. Lipsky is the author of “The Floating Kilogram and Other Editorials on Money,” just out from New York Sun Books

Posted on May 27, 2015, in Postings. Bookmark the permalink. Leave a comment.

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