Thursday, May 6, 2010

Clinton on the Gold Standard.

President Clinton made an interesting comment at the recent Peterson Foundation Fiscal Summit.

Discussing the economy's evolution over the past four decades, Clinton said, "And ever since we went off the gold standard, which was necessary for economic management purposes... economic inequality has increased."

Clinton is wrong that we needed to float the dollar for "economic management purposes," but that aside, this is a smarter analysis than you'll get from most conservatives these days -- at least since the passing of Jack Kemp, Bob Bartley and Jude Wanniski -- and is dead right.

Nathan Lewis, a Wanniski protégé, recounts in his excellent book that the average worker's weekly wage, measured against gold, today is something like 60 percent of what it was in 1971, the year Nixon ended the gold standard. (And he was writing in 2007, when gold was $400 lower.) Simply put, though the economy as a whole has recovered, wages for most Americans have never caught up with the dollar's 90 percent devaluation of the 1970s.

This is not to endorse the Left's critique of supply-side economics and inequality -- to the contrary: low taxes and sound money are essential to rebuilding American wealth across the classes -- but it might be smart for conservative reformers to acknowledge that all these years later we're still dealing with the catastrophic decision to float the dollar. (To say nothing of the weak and unstable dollar's role in the recent bubble and financial crisis.)

Rather than endlessly denying that inequality has increased, conservatives should embrace Clinton's comments and make the case for sound money and fixed exchange rates, once bedrock principles of the Right. For the lower 1/2 of American workers -- and most of the global poor while we're at it -- nothing would raise living standards more.

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