The Gold Standard: Litmus Test for GOP Candidates?
By Ralph Benko
Has the gold standard become “a litmus test of GOP presidential candidates?” It is, according to Think Progress‘ Matthew “Big Media Matt” Yglesias.
The Iowa Tea Party’s statewide, 21-stop bus tour culminated in a rally on July 2 in Des Moines lit by the suddenly incandescent candidacy of Rep. Michele Bachmann. (Disclosure: Her presidential campaign has retained one of this columnist’s partners, Robert Heckman.) Monetary policy is showing up in the core platform of almost all the GOP aspirants, including Bachmann’s.
At least six of the 10 generally recognized members of the GOP presidential field have put monetary policy — a strong dollar and opposition to abuses of the Federal Reserve — as a major campaign theme. Monetary policy hasn’t been a major campaign issue in a long time — maybe not since the 1896 presidential race. Bachmann spoke at length and with eloquence on the integrity of the dollar, much more than a rhetorical flourish.
As reported by Marie Diamond of Think Progress, Bachmann’s stump speech in South Carolina on July included:
The shorthand way of describing to you what quantitative easing is a license to print money without any value behind it…In the last two years of the Obama administration, if you pull a dollar out of your pocket, you have lost 14% of the value of that dollar. That means the federal government has stolen that money from you… They’ve been printing essentially valueless money and flooding it into the money supply. I don’t stand for that. A dollar in 2011 should be the same as a dollar in 1911. A dollar should be worth a dollar
She said this close to verbatim and much more in Iowa to an enthusiastic reception. This proves an astute instinct on her part. According to the results of a rigorous April poll of Iowans conducted on behalf of the Iowa Tea Party (and released publicly for the first time here), 773 respondents said that America should return to the gold standard; only 149 said it shouldn’t. This issue is a clear winner. The Iowa Tea Party invited this author to address its April 16 and July 2 rallies about gold, which, courtesy of the American Principles Project (with whom this writer is associated professionally,) was a major theme of its bus tour.
In short, the gold standard has arrived at center stage. Diamond’s ridicule is too deliciously clueless and counterfactual not to reproduce in full:
A dollar in 1911 had the same buying power as slightly more than $23 today. Bachmann doesn’t seem to understand that the dollar’s value naturally changes over time and accompanies economic growth — and that’s a good thing. Furthermore, the U.S. experienced inflation even when it was on the gold standard (which ended in 1971). Additionally, gold’s value isn’t fixed and also fluctuates over time — for instance, price of gold is currently at a record high.
So being on the gold standard and keeping a constant dollar value are inconsistent proposals. To achieve 0% inflation — which is itself an absurd idea, even according to Republican economists — a country would need an independent central bank.
Memo to Marie: The 19th century experienced profound economic growth. It was called “the Industrial Revolution.” Look it up. Notwithstanding massive economic growth, the dollar was worth about the same in 1900 as it was in 1800. It has only been since the birth of the Federal Reserve, in 1913, that the dollar has gone into freefall.
Demonetized gold will fluctuate in a far more volatile manner than the organic, almost imperceptible, waves that mark the gold standard. Many economists respected by Republicans, such as Nobel Laureate Robert Mundell, Brian Domitrovic and Judy Shelton praise the gold standard. Many conservatives are perfectly OK with a politically independent central bank to keep the dollar at parity with a defined weight of gold — much as the Bank of England accomplished for almost two centuries.
Think Progress unabashedly is propaganda, not news. Still, its readers deserve higher quality propaganda than … this.
Bachmann’s stump speech brushes right up on the gold standard. While she has not yet explicitly called for gold it is not unlikely that gold will emerge as her preferred policy.
Meanwhile three of the other noteworthy candidates are explicitly on record for gold: Rep. Ron Paul and former New Mexico Gov. Gary Johnson are unwavering. Herman Cain, a businessman and former chairman of the Federal Reserve Bank of Kansas City, hedged his initial pro-gold declaration and has since moved back toward gold.
Gov. Tim Pawlenty (Minn.) and Speaker Newt Gingrich have featured monetary policy planks in their campaigns. Pawlenty attacked fiat money in March. He since has proposed a “basket of commodities” rule but remains respectful of gold and possibly open to proof of its worthiness. Gingrich attacked the Federal Reserve in a speech before the Atlanta Press Club on June 22 and, as reported by National Journal, joined with “several other candidates in addressing a ‘gold standard tour’ of Iowa” — the same Iowa Tea Party tour co-sponsored by American Principles in Action. Reportedly Gingrich, while not persuaded, is respectfully open-minded about gold.
Gov. Mitt Romney, as a candidate, and the new entrants, former Utah Gov. Jon Huntsman and Rep. Thaddeus McCotter, of Michigan, have not yet addressed monetary policy. Only the struggling former senator from Pennsylvania Rich Santorum has disavowed the gold standard, further showing himself out of touch with us mere voters.
Thus more than half of the current Republican aspirants have moved monetary policy — and the strong dollar — as a key campaign plank, half of these calling for the gold standard. More are likely to weigh in. The gold standard, in only two years, has moved from a perceived-fringe prescription to the mainstream. How?
Fed Chairman Ben Bernanke “primed the pump,” not in a good way, of public interest with his two QEs. This raised popular awareness of, and ire about, monetary policy. The record shows that a small group of thought leaders effectively championed the gold cause.
In roughly chronological order this may be said to have begun with the forum which John Tamny, on Forbes’ Opinion pages and at RealClearMarkets, gave pro-gold advocates such as Brian Domitrovic, Charles Kadlec and Nathan Lewis — and with consistently savvy support for gold from the New York Sun under the editorship of Seth Lipsky.
Onto this fertile ground came Princeton Professor Robert George’s American Principles Project, chaired by Sean Fieler; then Judy Shelton’s Atlas Sound Money Project. The dynamic was supercharged by World Bank Group’s president Robert Zoellick’s famous gold FT op-ed; then by the formation of the Lehrman Institute’s The Gold Standard Now (for which this writer serves as editor); a call for gold by conservative champion Rep. Mike Pence in a major speech before the Detroit Economic Club; major op-eds by Sean Fieler and Jeff Bell, Charles Kadlec and Lewis Lehrman, in the Wall Street Journal; an important Reagan centennial gathering of supply side titans at the Manhattan Institute; an endorsement by the Weekly Standard‘s Bill Kristol; the most important Congressional hearing on monetary policy in at least a generation conducted by domestic monetary policy subcommittee chair Ron Paul; the high-profile championship by former presidential candidate and CEO Steve Forbes; and, most recently, an endorsement by Mundell.
Tea Party groups are determined to make returning to the gold standard a litmus test for GOP presidential candidates. And it looks like they’re succeeding. The Daily Caller reports that at least six Republican contenders are scheduled to speak at a pro-gold standard bus tour in Iowa. According to Andy Blom of American Principles in Action, “If we go back to making our money actually worth something, it stabilizes prices, it takes away the government’s credit card, they can’t just decide to go print tons of money and devalue the dollar.”
Stir in the populist power of the Tea Party, especially that of electoral bellwether Iowa’s Tea Party coordinated by Ryan Rhodes and April Linder. Add a sprinkle of state activists, such as Larry Hilton, who have, with assistance from American Principles In Action, moved gold standard legislation originally inspired by Dr. Edwin Vieira into law in Utah and are moving it forward elsewhere.
This is what moved the gold standard, decisively, from the realm of mavericks and social dystopians to mainstream conservative, and even Republican presidential candidate, policy. The gold standard’s momentum is building fast.
(Ralph Benko is a Tea Party Patriot with American Principles in Action and is also the author of “The Webster’s Dictionary: How to use the Web to transform the world.” His website is http://goldstandard2012.com.)