Monday, March 08, 2004

FRB: Speech, Bernanke--Money, Gold, and the Great Depression

I do not agree with all that Bernanke writes in this article, but I thought it important to post as he may be our next replacement for Greenspan. There are some dangerous implications here.

"The second monetary policy action identified by Friedman and Schwartz occurred in September and October of 1931. At the time, as I will discuss in more detail later, the United States and the great majority of other nations were on the gold standard, a system in which the value of each currency is expressed in terms of ounces of gold. Under the gold standard, central banks stood ready to maintain the fixed values of their currencies by offering to trade gold for money at the legally determined rate of exchange."

The above and the entire article shows a very superficial understanding of the workings of our exchange mechanisms and currency system, from someone who may be in a future position of such awesome power. If he had read enough of Keynes' or Davidson's real currency and exchange history he would know that the inter-war period was actually one of floating exchanges, not fixed gold standard, as when some are on the gold standard and others are not, and especially when the post war rates were set at wrong values, you have a floating exchange system by default. The same was true leading up to WWI. The empire clashes in many outlying colonial nations pre WWI had destabilized the entire world system of gold and silver structures, actually leading to the defacto floating exchange creation of WWI, and later `29. By legal default, we are repeating the same mistakes of the earlier history, today.

Bernanke had ought to at least get his history straight if he is to lead us. The currency question is the crucial sole point of law concerning all global economies, just as it always has been, and will always be. The world needs a global single balanced standard of law, it is sorely lacking.

FRB: Speech, Bernanke--Money, Gold, and the Great Depression

Remarks by Governor Ben S. Bernanke
At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia

I am pleased to be able to present the H. Parker Willis Lecture in Economic Policy here at Washington and Lee University. As you may know, Willis was an important figure in the early history of my current employer, the Federal Reserve System. While he was a professor at Washington and Lee, Willis advised Senator Carter Glass of Virginia, one of the key legislators involved in the founding of the Federal Reserve. Willis also served on the National Monetary Commission, which recommended the creation of the Federal Reserve, and he went on to become the research director at the Federal Reserve from 1918 to 1922. At the Federal Reserve, Willis pushed for the development of new and better economic statistics, facing the resistance of those who took the view that too many facts only confuse the issue. Willis was also the first editor of the Federal Reserve Bulletin, the official publication of the Fed, which in Willis's time as well as today provides a wealth of economic statistics. As an illustration of the intellectual atmosphere in Washington at the time he served, Willis reported that when the first copy of the Bulletin was presented to the Secretary of the Treasury, the esteemed Secretary replied, "This Government ain't going into the newspaper business."

Like Parker Willis, I was a professor myself before coming to the Federal Reserve Board. One topic of particular interest to me as a researcher was the performance of the Federal Reserve in its early days, particularly the part played by the young U.S. central bank in the Great Depression of the 1930s.1 In honor of Willis's important contribution to the design and creation of the Federal Reserve, I will speak today about the role of the Federal Reserve and of monetary factors more generally in the origin and propagation of the Great Depression. Let me offer two caveats before I begin: First, as I mentioned, H. Parker Willis resigned from the Fed in 1922, to take a post at Columbia University; thus, he is not implicated in any of the mistakes that the Federal Reserve made in the late 1920s and early 1930s. Second, the views I will express today are my own and are not necessarily those of my colleagues in the Federal Reserve System. ...Link

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