Friday’s Wall St. Journal has an editorial about the resistance to Trump’s nomination of Judy Shelton to the Federal Reserve’s Board of Governors. One has become so inured to opposition of all things Trump that this fight was passing by me without much notice. It was my recent reading of the novel Goldfinger that put this particular pièce de résistance* back on my radar.
Shelton is vilified, not just for her ties to Trump, but also for her criticism of the Fed and its central banking functions. Her greatest sin my be her advocacy for a return to the gold standard. Hers are the kinds of positions that got Ron Paul declared a “crazy uncle” during his 2012 presidential campaign. “Gold Standard” talk is the sign of mental instability and on this the fight-the-power left, the Never Trumpers, and the conservative establishment can all agree. But does that make it so?
The Journal article argues that Judy Shelton “might be right.” Since the 1971 end to the U.S. gold, the article points out, the U.S. has seen declining productivity growth. Since this was not the intention in ending the Bretton Woods system, the accepted theory is that other factors have suppressed productivity and, if anything, adherence to the gold standard would have made it worse. Correlation is not causation but when two factors move together, it is worth considering whether they are, in fact, linked.
Shelton has long warned that exchange rate instability caused by fiat currency policy misprices capital and depresses productivity growth. Politically-driven monetary policy decisions do support the livelihood of the financial sector as that industry hedges and gambles on the exchange rate movements. Thus, the period of declining productivity has also witnessed a massive expansion in size and profitability of Wall Street. Clearly this is going to exasperate all the populace bugbears such as income inequality, dominance of the 1%, and profit taking at the expense of the “real” economy.
The article goes on to point out that the mainstream academic research from universities and from the central bank economists themselves tend to draw similar conclusions, as long as the vocabulary is adjusted appropriately. Like Democracy itself, it may be that the gold standard is the worst of all currency regimines; except for all the others that have been tried. One can argue the theoretical virtues of expanding and contracting monetary supply in response and (better yet) anticipation of market fluctuations, but the track record of central banks actually getting that policy right? Very poor.
Reading about this confirmation process and considering the force of the attacks against Shelton got me thinking back to another article that I’d read the night before. This one is titled “Not Your Imagination — Society Is in Fact Going Insane, and I Can Prove It.” The essence of the argument is that “insanity” is relative to cultural norms, but as our culture becomes siloed and technology maximizes the echo chamber, micro-culture norms make disagreement literally become insanity. The article is an informative and entertaining read, and is both broader and narrower than the reference I make to it here. Take a look at the source.
Back to the gold standard, it notable that less than 100 years ago the idea that paper money should be backed by gold was, in fact, the “sane” view. Suggesting money should be valued by central bank fiat would have been crazy. Even today, it depends what you read and with whom you associate. On a steady diet of articles like that from the Journal, I’d be thinking that those lined up against Shelton are in fact the insane ones – despite the fact that the ranks of these insane would include the bulk of mainstream thinkers.
Although the author may have proven that we’re all going insane, he doesn’t have a prescription for a return to sanity. His conclusion is that social media is a devil’s bargain and wonders if he, himself, should avoid it. This is not quite a solution for returning all of our society to sanity. We’ve seen what happens when the likes of Facebook attempts to curate news to provide a better balance. What’s worse than algorithms figuring out the news we want to see is individuals determining the news that is good for us. The days of Walter Cronkite and Edward R. Murrow telling us what to think are, for better or for worse, long behind us. The solution may be that communicators may have to learn new civic virtues and not demonize those on the other side of their arguments. Unfortunately, demonization and othering works and so are unlikely to go away.
Entirely unrelated, I read another article right after the “Society Going Insane” piece. It’s a review, sort of, of the newish board game Nevsky by the designer of the COIN series, Volko Ruhnke. The article is written by Bruce Geryk. Back in the day, Bruce was easily one my top three reviewers in terms of game recommendations, so it’s not surprising I appreciate his take on wargame design. And, really, this article is less a review of Nevsky gameplay and more about the use of abstraction and detail in the design of high-fidelity wargames. One again, worth reading through to get his thoughts.
In addition to making me think, he’s now got my interest focuses on what is promised to be a new series out of Ruhnke. It is being called the Levy & Campaign and appears (through reading articles only) to be a solution to the wintering issue for which I complemented Hammer of the Scots for having one of the few, elegant solutions. Geryk’s criticism of the transport mechanism in Nevsky has me a little nervous, but I’m definitely looking forward to this series.
See, it’s not all doom and gloom.
*I know that’s not what this phrase means. It’s a pun.