Robert P. George's Cross of Gold
After the Panic of 1893, the nation was suffering from a period of deflation -- the downward spiral of prices and wages. Farmers were among the hardest hit. Crop prices dropped the point where many faced financial ruin.
Democratic presidential candidate William Jennings Bryan, campaigned in the election of 1896 against the Republican economic plan of setting the value of the dollar to the value of the amount of gold the United States held in reserve. At his party's convention Bryan gave his famous Cross of Gold Speech. Therein, he accused the Republicans of failing to employ commodity or "demand-pull" inflation (as opposed to wage inflation, an increase in prices for commodities such as agricultural products, petroleum or minerals) as a means if checking deflation.
Now, more than a century after Bryan's historic speech, and almost eighty years since FDR ended it -- the gold standard is rising in our national discourse like zombies from the grave in a bad horror movie.
Back then, before the creation of the Federal Reserve System, Bryan was arguing for a monetary standard based upon bimetallism -- one that would have established a fixed rate of exchange between gold and silver. The economic landscape has changed since then, but the role of governmental action to improve the standard of living remains an issue.
Inflation pegged to increases in worker productivity is the reason why a couple that bought a house in 1960 saw their fixed mortgage become more manageable with each passing year. Moderate increases in wage inflation make debt more manageable for the employed. It also reduces the reliance upon tenuous credit. In other words, a judicious amount of annual inflation is a vital component of wealth creation and thus, economic liberty for the many, not just the few.
The web site The Aporetic explains why the Right is getting so gold buggy:
People who like the idea of a gold standard like the idea that gold has "real," "intrinsic" value, which is a fancy way of saying it just is valuable, in the same way that lead is heavy. "Value," they argue, is a property installed in gold by God or nature. An economy based on gold is thus an economy founded in natural law: gold bugs dream of an economy which government can't tamper with. All values will be "real" values. The government can't issue more gold, so it can't create debt by simply printing more money.
Slate ran a good piece on what would happen if we returned to the gold standard. You can add to that rapid deflation and spikes in interest rates. Deflation sounds good, except that interest rates would spike while the prices manufacturers and businesses could get for their goods would collapse. Deflation was precisely the problem in 1932. But one set of people would benefit to a remarkable degree, and that is, those who hold capital, e.g the rich. The value of their money would sky-rocket, as would the price they could demand for lending it.
Get it? As wages go down, workers rely more and more on credit instead of their own earnings to obtain property and services. In short, the American economy goes from being one made up of upwardly mobile individuals to larger numbers of debtors in living in one huge company town. This is not exactly the concept of individual liberty envisioned by Adam Smith in 1776.
There was no better example of the way that the Right is campaigning against the controlled use of inflation than recent comments by Sarah Palin.
Palin - echoing Glen Beck, attempted to take on the Wall Street Journal over the rising costs of groceries, erroneously implying that food prices are a reliable indicator of overall inflation (they are not, as explained below).
The problem with Palin's analysis is that food and fuel costs are so volatile that they are not counted as a core indicator of inflation. Paul Krugman pointed out, for example, that over the past decade, food prices have not been that far a field of the general rate of inflation, which in and of itself is practically non-existent. If anything, there is a much greater risk of overall deflation.
What the gold bugs like Glen Beck, Palin and George won't acknowledge is that the economy could use a bit of moderate wage inflation, the type that does not exceed increases in the percentage of worker productivity, but keeps pace with it. The reason they won't say anything about it is that it requires the use of the other defamed economic tool, taxation.
There is nothing new about gold bugs. But what is new is Religious Right strategist and well-connected GOP neocon of Robert P. George's emergence as a leader of the contemporary gold bug brigade. I suspect that George sees that advocating a doctrine of classical, laissez-faire economics enhances his appeal with non-Catholic fundamentalist Protestant Reconstructionists
In short, it makes for good coalition building on the far right. As Julie Ingersoll recently at observed at Religion Dispatches:
For the former Alaska governor's audience, though, her attack on the Fed is adequate-shall we say-stimulus. In the Tea Party's short life, the Federal Reserve has been a target of its oppositional rage, spurred by Tea Party godfather Rep. Ron Paul's persistent calls to eliminate it.
This supposed Biblical prosciption against the Fed -- as well as inflation -- is described by Gary North:
The Bible is clear on three legal principles: (1) monetary debasement is wrong (Isaiah 1:22); (2) multiple indebtedness, which is the basis of fractional reserve banking, must not be allowed (Exodus 22:26) ; (3) weights and measures must not be tampered with (Lev. 19:36). All three are violated by modern economic policy.
That's why it is so significant that the gold standard is a featured issue of George's American Principles Project. The goal of Gold Standard 2012 is "...to reach out to lawmakers to advance legislation that will put the U.S. back on the gold standard." They claim to be alarmed about the "...explosive growth of government and unrestrained deficit spending kicked into high gear by the Obama administration and the 111th Congress..." But I suspect that their real concern is Keynesian economics.
Using deficits to create aggregate demand and then judiciously using taxation to pay down the resulting debt (which simultaneously applies the brake to any possible resulting inflation), has a proven track record.
Add to my suspicions the vital role that organized labor plays in increasing wages. We must remember that many of the economists Robert P. George and friends subscribe to (Amity Shlaes, Richard A. Epstein) believe that if workers would just work for lower wages, unemployment ceases to be a problem. This is economic conservatism's dirty little secret -- the exposure of which is liberalism's opportunity.
And this brings us back to William Jennings Bryan. He is speaking to us from the past. Bryan's unimpeachable credentials as fundamentalist Christian refute the Reconstructionists who cite inflation as sinful. And he fully understood the perils of wealth inequality built solely upon political power.
And to that end, in 1896 Bryan reminded the nation who creates wealth:
When you come before us and tell us that we shall disturb your business interests, we reply that you have disturbed our business interests by your action. We say to you that you have made too limited in its application the definition of a businessman. The man who is employed for wages is as much a businessman as his employer. ... The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world.
More than a century later, Bryan still refutes the zombie gold bug madness of Robert P. George. Yes, like the Princeton neocon Bryan was orthodox in his Christianity. But unlike George, Bryan did not put his faith at the disposal of his generation's oligarchs. Instead, he tried to to use it to improve the lot of all God's people.
Robert P. George's Cross of Gold | 5 comments (5 topical, 0 hidden)
Robert P. George's Cross of Gold | 5 comments (5 topical, 0 hidden)