Recently, two of The Huffington Post’s political reporters, Eliot Nelson and Jeffrey Young (who have managed to fuse ridicule and journalism into something functionally indistinguishable from “Alternative Facts”) recently made a telling observation. Their characteristic facetiousness may obscure a brilliant intuition. They observed: “we give it a month until Trump calls for the gold standard to be reinstated because he likes the sound of it.”
As I have previously written, gold has a profound appeal for Donald Trump:
Bloomberg View‘s Timothy L. O’Brien recently provided a colorful and insightful feature entitled “Donald Trump Loves Gold and Don’t You Forget It.”
Therein O’Brien provides an opulently illustrated, lengthy litany of the many, many gold-themed elements to Donald Trump’s campaign and life….
President Trump’s intuitive appreciation of gold is not merely aesthetic. As I observed at Forbes.com in a column headlined “Donald Trump, The Gold Standard, Maynard Keynes, And Our Madmen In Authority“:
As Keynes wrote in his General Theory of Unemployment, Interest, and Money (chapter 24, part V):
“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
Keynes was a supremely practical man. One infers he is spinning in his grave over his absurd status as the prevailing defunct economist enslaving practical men and as the academic scribbler from who our latest madmen in authority are distilling their frenzy.
In his 1923 Tract on Monetary Reform, Keynes famously called the gold standard a “barbarous relic.” What is less generally appreciated is that he was referring to the “interwar gold standard,” not the real deal classical gold standard. The “interwar gold standard” now is universally understood to have been a mere façade. It preserved the name of the gold standard but violated its fundamental “rules of the game.” Think baseball without balls and strikes.
The “interwar gold standard” in fact was a barbarous relic. It very likely was the main cause of the Great Depression.
The classical gold standard had closed shop in August 1914 and was innocent of causing the Depression. FDR in no way took America off the gold standard.
Michelle Jamrisko, a reporter for Bloomberg News, was among the first to notice this. Last month she reported Make America Gold Again: Calls for Everyone’s Favorite Standard Are Back Again. Jamrisko astutely reported that Donald Trump, the presumptive Republican presidential nominee, and Ted Cruz, the runner up, expressed sympathy for, or actually campaigned on, the gold standard:
Ted Cruz, in one of the early candidate debates last year, said the Fed “should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold.”
Then there was Donald Trump. “We used to have a very, very solid country because it was based on a gold standard,” he told WMUR television in New Hampshire in March last year. But he said it would be tough to bring it back because “we don’t have the gold. Other places have the gold.”
One also well might take note of Trump’s comment to GQ:
Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.
Trump’s intuitive appreciation of gold is fully supported by history. Liaquat Ahamed’s Pulitzer Prize-winning Lords of Finance recounts, from FDR’s “first hundred days”:
The string of measures was a strange mixture of well-meaning steps at social reform, half-baked schemes for quasi-socialist industrial planning, regulation to protect consumers, welfare programs to help the hardest hit, government support for the cartelization of industry, higher wages for some, lower wages for others, on the one hand government pump priming, on the other public economy. Few elements were well thought out, some were contradictory, large parts were ineffectual. While much of the legislation was very laudable, aimed as it was at improving social justice and bringing a modicum of economic security to people who had none, it had little to do with boosting the economy. Tucked away, however, in this whole motley baggage, as a last-minute amendment to the Agricultural Adjustment Act, was one step that succeeded beyond anyone’s wildest expectations in getting the economy moving again. This was the temporary abandonment of the gold standard and the devaluation of the dollar.
The only quibble here is that FDR did not abandon the gold standard, even temporarily. He merely, under the shrewd guidance of economist George Warren, the leading commodities price expert of his day, revalued the dollar from $20.67/oz to $35/oz to adjust it to the post-war increase in commodities prices.
There is precious little evidence that Trump’s senior economic team, so far, has any affinity for, or even grasp of, the power of the gold standard to get the economy roaring and jobs created faster than employers can fill them. Since prices of everything are determined by supply and demand, strongly increased demand for workers is what will — and the only thing that will — restore upward income mobility. His team also has not appraised him of the fact that we have the gold and restoring the gold standard would be much easier than he assumes.
As I observed in “A Letter to the Left: The Gold Standard Will Restore Upward Mobility“:
“[S]omething happened,” and the wages of goods-producing workers flatlined, never to recover. He [Stan Sorscher, writing inThe Huffington Post] is right and perceptive in this too little appreciated fact.
Yet he attributes this to some kind of mystical “shift in our country’s values. Our moral, social, political and economic values changed in the mid-70’s.”
As it happens, “X” correlates with Nixon shutting down the Bretton Woods gold standard in 1971 and the epic failure to get it fixed and restored in 1973. The drag, after a modest lag, filtered into the working economy. The rest is persistent stagnation for median families.
It was the destruction of the (dilute) gold standard which precipitated the death, or at least long coma, of the American Dream. That, in turn, caused the ensuing degradation “in our moral, social, political and economic values” as America turned Hobbesian.
President Trump, unlike conventional politicians, is exempt from being one of those “slaves of some defunct economist.” He is not a prisoner to those “madmen in authority” about whom Keynes warned us. Eliot Nelson and Jeffrey Young, while attempting to be facetious, present a brilliant intuition: “we give it a month until Trump calls for the gold standard to be reinstated because he likes the sound of it.”
In the interest of robust job creation, 4 percent GDP growth rates, and equitable prosperity, let us hope that, indeed, Trump calls for the gold standard to be reinstated because he likes the sound of it and convenes a team of gold standard experts such as APP’s chairman Sean Fieler, businessman/philanthropist Lewis E. Lehrman, public intellectual George Gilder, former presidential candidate Steve Forbes, presidential transition team advisor Dr. Judy Shelton and a few others to map out exactly how to use gold to make America great again.
Ralph Benko is a monetary policy advocate and an internationally syndicated columnist.
Photo credit: Gage Skidmore