Jeb Bush recently showed a dignified open-mindedness toward the gold standard. He thereby is much more to be commended than Neo-Keynesian columnists like Matt O’Brien — or “Reformocons” like James Pethokoukis — both of whom seem to value elite cachet over empirical data such as adduced by the Bank of England.
In his recent AEIdeas blog, AEI blogger James Pethokoukis writes “Jeb Bush was asked about the gold standard. He should have gone all Rick Grimes on that zombie idea”.
So Jeb Bush was asked on the campaign trail about returning to the gold standard. His answer: “I don’t know. I don’t think so. I don’t know for sure.” I think the WaPo’s Matt O’Brien is right that the following would have been the far better replay:
This was not the right answer. The right answer would have been that the gold standard was a “barbarous relic” even 80 years ago, and might be the world’s worst idea today.
Bush should have bashed that zombie idea in the head like Rick Grimes dispatching a walker. The case for the gold standard is really pretty awful, as O’Brien details. Just terrible.
Actually, the case for the gold standard, as recently restated in The Wall Street Journal by APP advisor Lewis E. Lehrman and John Mueller, is excellent, and Bush should be commended for keeping an open mind . Bashing the gold standard — and anyone who fails to condemn it in at least borderline-hysterical terms — seems a recurring obsession for Pethokoukis and O’Brien.
I have called out Pethokoukis’s absurd errors and omissions previously. In my column at Forbes.com, I called out here and here the major fallacy, the Eichengreen Fallacy, behind Pethokoukis’s obsession.
The oddest thing about Pethokoukis’s manifestly wrong critique is his over-reliance on the center-left leaning Washington Post‘s Matt O’Brien. O’Brien is an often perceptive columnist who has a blind spot on the gold standard. Pethokoukis also relies too heavily on a 2012 Booth School poll of elite academic economists, almost none of them monetary economists, some of whose flaws I addressed in a column in TheStreet at the time. As for its power to persuade, this survey has almost as much intellectual credibility as a pair of Manolo Blahnik shoes.
That said, I — like Matt O’Brien — am a mere columnist, not an economist. If Mr. Pethokoukis were serious about grappling with the gold standard — rather than cleverly propagandizing against it — he would engage seriously with the Bank of England’s 2011 Financial Stability Paper No. 13. This provided a rigorous, and fascinating, assessment of the real world performance of the gold standard, and of the gold-exchange standard, and of the fiduciary paper “Dollar Standard.”
The Bank of England, “the Old Lady of Threadneedle Street,” is the world’s oldest and perhaps most distinguished central bank. Real scholars there found that the fiduciary “Dollar Standard” ushered in by President Nixon on August 15, 1971, has badly under-performed both the classical gold standard and the Bretton Woods gold-exchange standard. It flunks every category examined, including number, length and depth of recessions, employment, inflation, and currency and banking crises. Financial Stability Paper No. 13 was nicely summarized by APP economic advisory board member Charles Kadlec at Forbes.com.
By demeaning the gold standard, against the evidence, Mr. Pethokoukis implies himself to be a True Blue Nixon Shock Kinda Guy. Wage-Price controls, anyone? (Is Sen. Marco Rubio, who Mr. Pethokoukis reportedly advises, aware?)
Gov. Bush’s opinion on the gold standard carries more dignity and matters a great deal more than either that of O’Brien or Pethokoukis. In pursuit of economic growth — a central objective of Gov. Bush’s presidential campaign — let’s rely on the work of real monetary scholars such as those at the Bank of England and not on the derivative work of a mere columnists, like O’Brien, Pethokoukis … or me … or on flimsy polls of fashion-conscious non-monetary economists.
Let’s really dig down into the empirical record. The record shows the gold standard is a critical component of job creation and of equitable prosperity.
Bravo, Jeb! Bush, for admirable open-mindedness toward the classical gold standard. On to 4 percent growth!
Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles in Action’s Senior Advisor, Economics.