Tuesday items: Murdock on Gingrich's tax plan; Tamny on the weak dollar's role in airline bankruptcies; Laffer on Obama's tax increases.

At NRO, Deroy Murdock applauds Newt Gingrich’s tax plan.

On Forbes, John Tamny explains the weak dollar’s role in bankrupting American Airlines.

In The WSJ, Charles Schwab argues the Fed’s low interest rates are hurting the economy.

From Bloomberg, Philip Coggan suggests China will shape the next Bretton Woods monetary pact.

On The Kudlow Report, Art Laffer discusses the President’s tax increase proposal:



At The American, James Pethokoukis argues unemployment is substantially higher than the official rate indicates.

From First Trust, Brian Wesbury examines falling labor force participation.

On Forbes, Lawrence Hunter suggests the President’s opposition to success is choking the economy.

Saturday Night Live mocks Newt Gingrich’s moon colony idea:



In The Washington Examiner, Mercatus’s Veronique de Rugy counters The New Yorker’s Jonathan Chait on progressive taxes.

The NYT examines Ron Paul’s “flinty” world view.

Tuesday summary: Reynolds on unemployement benefits; Benko reports conservative support for monetary reform; Rutledge on North Korea.

From Forbes, Alan Reynolds argues shortening unemployment benefits' duration would lower unemployment and help the President’s re-election prospects.

On TGSN, Ralph Benko highlights conservative leaders’ support for sound money.

At Forbes, Charles Kadlec applauds and critiques the recent Bank of England report on Bretton Woods.

On The Kudlow Report, John Rutledge suggests North Korea may liberalize under its new leadership:



From The Washington Times, Richard Rahn rebuts Keynesian claims on government spending.

In USA Today, Mitt Romney opposes the European-style nanny state.

At The WSJ, Jason Riley notes that Romney’s 25% support is healthy for this stage of a primary contest.

In The NYT, Joe Nocera suggests GSEs were not responsible for the real estate bubble.

From Alhambra Partners, Joseph Calhoun analyzes the economies of Europe, Asia and the US.

On Fox, Steve Forbes debates EPA regulations:



In The Washington Post, Charles Lane challenges the President’s income inequality claims.

From The NYT, Bruce Bartlett argues cutting the corporate tax rate won’t improve the economy. 

At COAL, Paul Krugman wonders if China’s real estate bubble is bursting.

Businessweek on Nixon's dollar shock.

At Bloomberg Businessweek, Roger Lowenstein provides an excellent – and surprising, coming from the mainstream media – report on the breakdown of the Bretton-Woods gold-linked dollar, including laying blame on monetarists Milton Friedman and George Shultz, and linking today's economic problems to the floating dollar.

From his 1999 Nobel Prize lecture, Robert Mundell explains the circumstances that led to the demise of Bretton-Woods and the Great Inflation of the 1970s:

The adoption of my policy mix [by JFK after 1962] helped the United States to achieve rapid growth with stability. It was not intended to and could not solve the basic problem of the international monetary system, which stemmed from the undervaluation of gold. Nevertheless the problem of the U.S. balance- of- payments was intricately tied up with the problem of the system. With very little excess gold coming into the stocks of central banks from the private market, and the US dollar the only alternative component of reserves, the U.S. deficit was the principal means by which the rest of the world was supplied with additional reserves. If the United States failed to correct its balance of payments deficit, it would no longer be able to maintain gold convertibility; on the other hand, if it corrected its deficit, the rest of the world would run short of reserves and bring on slower growth or, worse, deflation. The last scenario hinted at a repetition of the problem of the interwar period.

Two basic solutions were consistent with preserving the system. One solution was to raise the price of gold. The founding fathers of the IMF had put a provision in the IMF Articles of Agreement for dealing with a gold scarcity or surplus: a change in the par values of all currencies, which would have changed the price of gold in terms of all currencies and left exchange rates unchanged. In the 1968 election campaign, candidate Richard M. Nixon chose Arthur Burns as his emissary on a secret mission to sound out European opinion on an increase in the price of gold. It turned out to be favorable and Burns recommended prompt action immediately after the election. Nothing, however, came of it.

The other option was to create a substitute for gold. This course was in fact adopted. In the late summer of 1967, international agreement was reached on an amendment to the IMF articles to allow the creation of Special Drawing Rights (SDRs), gold-guaranteed bookkeeping reserves made available through the IMF, with a unit value equal to one gold dollar, or 1/35 of an ounce. Somewhat less than SDR 10 billion were allocated to member countries in 1970, 1971 and 1972, but they proved to be inadequate—too little and too late--to meet the main problems of the system.

On August 15, 1971, confronted by requests for conversion of dollars into gold by the United Kingdom and other countries, President Nixon took the dollar off gold, closing the "gold window" at which dollars were exchanged for gold with foreign central banks. The other countries now took their currencies off the dollar and a period of floating began.

But floating made the embryonic plans just forming for European monetary integration more difficult, and in December 1971, at a meeting at the Smithsonian Institution in Washington, D. C., finance ministers agreed on a restoration of the fixed exchange rate system without gold convertibility. A few exchange rates were changed and the official dollar price of gold was raised but the act was almost purely nominal since the United States was no longer committed to buying or selling gold.

The world thus moved onto a pure dollar standard, in which the major countries fixed their currencies to the dollar without a reciprocal obligation with respect to gold convertibility on the part of the United States. But U.S. monetary policy was too expansionary in the following years and, after another ineffective devaluation of the dollar, the system was allowed to break up into generalized floating in the spring of 1973. Thus ended the dollar standard….

With the breakdown of the system, money supplies became more elastic, accommodating not only inflationary wage developments but also the monopolistic pricing of internationally traded commodities. Each time the price of oil was raised in the 1970's, the Eurodollar market expanded to finance the deficits of oil-importing countries; from deposits of $223 billion 1971 they would explode to $2,351 billion in 1982(International Monetary Fund, IMF International Statistic Yearbook, 1988 p. 68).

Inflation in the United States had now become a major problem. It had taken twenty years, from 1952 to 1971, for U.S. wholesale prices to rise by less than 30 percent. But after 1971, it took only eleven years for U.S. prices to rise by 157 percent! This mainly peacetime inflation was greater than the war-related inflations from World War II (108 percent over 1939-48), World War I (121 percent over 1913-1920), the Civil War (118 percent over 1861-1864) or the War of 1812 (44 percent over 1811-1814). The greatest inflation in U.S. history since the War of Independence took place after the United States left gold in the decade after 1971.

Wednesday update: Melloy on the true inflation rate; The Post reports from Bretton Woods; Tamny critiques Rep. Ryan's plan.

From CNBC, John Melloy notes that inflation is near 10% using 1970s methodology.

The Washington Post reports from the monetary conference in Bretton Woods, NH.

From the archive, Richard Nixon ends the Bretton Woods agreement by suspending dollar convertibility (h/t: Free Banking):


On NRO, Larry Kudlow counsels concern but not panic over the weak dollar.

At RCM, John Tamny critiques the Ryan plan:

So while the falling dollar since 2001 and the certain cruelty the latter foists on the vast majority of Americans (Ryan, quite unlike Reagan, made no mention of the dollar in his Wall Street Journal piece promoting the plan) remains the unsung factor when it comes to an unhappy electorate, high levels of spending loom large, and a return to 2008 levels reveals a Republican leadership still well out of touch with the an increasingly skeptical base.

But if we move away from spending for now, it should be noted that seemingly like all other Republicans who've made promises of fiscal prudence ahead of large advances in government, Ryan is committing the fatal error of bringing deficit reduction talk into a discussion that shouldn't include it. To mention deficits is to implicitly suggest a problem of revenues, but there's no such problem. We have deficits because Republicans (including Ryan) and Democrats have been spending way too much for way too long.

In talking up deficit reduction Ryan gives the Democrats the opening they need to bring "revenue enhancers" into the discussion; meaning marginal tax rate increases.

At Bloomberg, Amity Shlaes suggests the alternative to tax increases is the Ryan plan.

In The WSJ, Stephen Moore reports on the budget debate.

On The Kudlow Report, Stephen Moore debates the President’s tax hike proposal:



At TGSN, Ralph Benko notes the Founding Fathers’ preference for precious-metal backed money.

From Café Hayek, Russ Roberts counters Joseph Stiglitz’s comments on the wealthy.

Thursday items.

At NRO, Don Luskin suggests uncertain Fed policy is disrupting the economy.

At The American Spectator, James P. Gannon laments the Fed's impact on his savings account.

At Asia Times, David Goldman offers a bleak assessment of the economy.

At Classical Capital, Wayne Jett foresees a U.S. default.

On the Kudlow Report, Stephen Moore debates the super rich tax rate idea.

US News blogger Peter Roff predicts an October Surprise of a partial tax cut extension.

The WSJ reports small business owners fear tax increases.

At The Economist, Will Wilkinson rebuts the notion that inequality caused the economic crisis.

Market Watch's David Callaway says the Fed's Jackson Hole retreat will be "more goat rodeo than Bretton Woods."

At Commentary, James Glassman argues the continued malaise confirms the failure of liberal economics.