If you care about economic growth, this matters. Before getting to the profound significance of this legislation, let's take a quick look at the problem, stagnation, and the cluelessness maybe now beginning to end in Washington. "Let's clue you in.
"Secular stagnation" is a euphemism — "mysterious forces of the universe" — meant to hide feckless federal policy. According to the New York Times "Bigfoot Floyd" Norris, several years ago, Ranking the Presidents by G.D.P. :
George W. Bush, 1.6% (previously 1.7%)
George H.W. Bush, 2.1%
Gerald Ford, 2.2%
Recommended by Forbes:
Dwight Eisenhower, 2.5%
Richard Nixon, 3.0%
Jimmy Carter, 3.2%
Ronald Reagan, 3.5%
Bill Clinton, 3.8%
Lyndon B. Johnson, 5.0%
John F. Kennedy, 5.4%
We are at least 15, and arguably 44, years into a "Little Dark Age" of economic stagnation. Note Keynes:
There are many of us, both of the left and the right, who indict the Fed as torpedoing economic growth. 15 years ago, when stagnation beset the American economy, there had been no material change in tax, regulatory, spending or trade policy. The only signal change? Monetary policy. The Fed departed from its era of the "Great Moderation."
Many Republican presidential aspirants, including Dr. Ben Carson, Donald Trump, Sens. Ted Cruz, Marco Rubio, and Rand Paul, Govs. Mike Huckabee and Chris Christie, and businesswoman Carly Fiorina are putting Fed policy into the national conversation. Now comes the Congress which, by the United States Constitution, is vested with the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standards of Weights and Measure."
It is notable that the same clause couples the regulation of the value of money with the power to fix the standards of weights and measures. Of the three axiomatic qualities of money — a medium of exchange, a store of value, and a unit of account — perhaps the most important is its property as a unit of account. As Forbes's own editor-in-chief Steve Forbes observes, in his, with Elizabeth Ames's, seminal classic Money: How the Destruction of the Dollar Threatens the Global Economy — and What We Can Do About It:
The New York Sun, along with Forbes.com a pace-setter in coverage of monetary matters, shed some dawn's early light:
In both the presidential and the Congressional wing of the GOP, fresh and premier attention is being paid to the importance of high integrity monetary policy for economic growth and equitable prosperity. Regarding the recently House-passed legislation respecting the Fed I elsewhere (in press) have written:
Impressive team. Impressive teamwork. Game changing.
Speaker Ryan and Leader McCarthy now have a deep bench of chairmen who have, between them, perhaps the greatest level of financial intelligence enjoyed in the Congress since Rep. Gramm dined alone.
The regime ushered in by Nixon correlates quite precisely with the flat-lining of median family income. That, and not "income inequality," is the key issue besetting voters. As JFK once said, "A rising tide lifts all boats." The tide has been going out for far too long. Why?
The Fed's now vice chairman, Stanley Fischer (an honorable and eminent public servant, now as then), when serving as chief economist of the IMF in 1999, was interviewed by Federal Reserve Bank of Minnesota official Arthur J. Rolnick. Dr. Fischer was asked about the gold standard, one of several rule-based monetary regimes now coming to attention and renewed respect.
Dr. Fischer then stated that "It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now." Very soon thereafter misguided Fed policy brought the American economy a cropper.
And, not long thereafter, another cropper. Hubris, as defined by the New Oxford American Dictionary, is "excessive pride or self-confidence." Nemesis always follows hubris.
The Fed, backed by the White House, is pushing back, hard, on a virtuous effort by the Congress to press toward a rule-based regime and to ask whether the Fed might in fact be at least somewhat accountable for the "secular stagnation" besetting America. One hopes that the United States Senate will not be intimidated by the Fed's pressure.
One hopes that, without impairing the invaluable independence of the Fed (which the FORM Act in no way impairs), the Senate, following the House, will execute its Constitutional power over the regulation of the value of our money. It really is high time for our elected officials to intervene to restore equitable prosperity.
The Paul Ryan House, under the Majority Leadership of Kevin McCarthy, and thanks to real statesmanship of Chairmen Hensarling, Brady, Huizenga and Garrett, among others, at long last is rising to the occasion. Congress now, by attacking what appears to be the root cause of secular stagnation — mediocre monetary policy — is pointing America back to vibrant, equitable, economic growth.
Mark November 19, 2015 on your calendar. This might just mark the beginning of a big, and welcome, transformation: the turning of the tide toward prosperity. Congress is working, with at least initial success, to put an end to a Little Dark Age long besetting the American economy. Let the Senate do its work. May a rising tide lift all boats.
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Ralph Benko is senior advisor, economics, to American Principles in Action's Gold Standard 2012 Initiative, and a contributor to the ARRA News Service. Founder of The Prosperity Caucus, he was a member of the Jack Kemp supply-side team, served in an unrelated area as a deputy general counsel in the Reagan White House. The article which first appeared in Forbes.
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