John Tamny's New Book on the Money; Congress, and Economy, Could Benefit

In The Money Confusion, John Tamny grapples with one of the most mangled policy matters ever: good money. Full disclosure, Tamny, when a Forbes editor, recruited me to write a weekly column for eight years there and has been editorially generous ever since. So, I’m biased.

That said, The Money Confusion is reminiscent of The Economy in Mind by the late, great Warren Brookes. Tamny intellectually resembles Brookes, described by Harvard Magazine as having “Unflinching faith in the capacity of human ingenuity to overcome scarcity.” As does Tamny.

Tamny and I have our differences. That said, we agree on the crucial importance of good money to equitable prosperity.

Neither of us are “gold bugs,” those long preaching the collapse of the world monetary and financial system with a dramatic escalation in the price of gold. Tamny skewers them as crackpots.

We both are respectful of the secular success of the gold standard as an agent of equitable prosperity. That’s well articulated by gold standard advocates such as George Gilder and Steve Forbes (to whom he pays due tribute) and my own mentor, protégé of gold standard champion Jacques Rueff, Reagan Gold Commissioner Lewis Lehrman, curiously omitted.

Tamny and I have disagreements as to the mechanics of monetary policy. We both, however, agree on “a historical truth of the last one hundred years that presidents get the dollar they want.”

That said, Tamny has some odd opinions about such mechanics, inveighing repeatedly on the total irrelevance of the Fed, entering his Maximum Contrarian Mode. His odd claims of irrelevance, however, are largely irrelevant.

Tamny grapples heroically with the essential, sorely neglected, question of how to make our money as fine a unit of account as the meter, the kilogram and the second.

He does not quite state his mechanism. My own view?

Let Congress delegate the work of regulating the value of the dollar to the National Institute of Standards and Technology which defines our other units of account with mind-boggling precision.

Congress’s power to coin Money, regulate the Value thereof, and of foreign Coin, is to be found in the Constitution’s Article I Section 8 clause 5. There it is, cheek by jowl, with Congress’s power to “fix the standard of Weights and Measures.” Quelle coincidence!

NIST has done brilliantly in fixing the standard of Weights and Measures to the picometer and nanosecond. The Fed has done a comparatively poor job maintaining a steady value for the dollar, whose value has plummeted on its watch.

How important is good money to equitable prosperity? Consider the bombed-to-smithereens post-WWII German economy. Ludwig Erhard transformed it instantaneously, on June 21, 1946, via currency reform. That was the trigger for the ‘German Economic Miracle.’

Economist (later Fed governor) Henry Wallich:

“The spirit of the country changed overnight. The gray, hungry, dead-looking figures wandering about the streets in their everlasting search for food came to life. … Jacques Rueff … observed [as recorded by Erhard himself] ‘Only an eye-witness can give an account of the sudden effect which currency reform had on the size of stocks and the wealth of goods on display. Shops filled up with goods from one day to the next; the factories began to work. On the eve of currency reform, the Germans were aimlessly wandering about their towns in search of a few additional items of food. A day later they thought of nothing but producing them.’”

The O.G. supply-side formula ended stagflation and led to sizzling prosperity under presidents Reagan and Clinton. Supply-side’s charter document, The Mundell-Laffer Hypothesis, was approximately 99% about good money, 1% tax rate reduction. What came to be known as “the Laffer Curve” was buried in a footnote.

Reagan delegated monetary stability to the occult precincts of the Fed where Tall Paul Volcker handled it, effectively, brutally and mysteriously. It never rivaled the spectacle of tax rate cuts, dramatized as “the Tax Revolt,” which dominated the headlines.

Thus, tragically, the importance of a stable dollar to equitable prosperity now is nearly forgotten. Tamny is to be commended for sounding the alarm. Bravo!

My main quibble is that Tamny weakens his case by repeatedly erecting and demolishing, sarcastically, straw man arguments. The Monetary Confusion’s text is adorned by more and bigger effigies than Burning Man.

One relishes Tamny’s splendid theatricality. Yet it diminishes his persuasiveness.

If sarcasm were persuasive, Paul Krugman would be Fed chair.

That said, my quibbles are trivial. The Money Confusion is a brave, important, book. If one of Tamny’s benefactors would have copies delivered to every office on Capitol Hill it could really help Congress focus on one of the most neglected matters in politics: good money.

Buy it, enjoy it … and then … mail it to your member of Congress. John Tamny shines an important beacon on the awaiting golden age.