Brookes began by stating that "conservatives need to understand that without basic monetary reform there is no way to balance the U.S. budget, with or without tax increases and budget cuts, and even with the most optimistic GNP growth projections." He then offered a 3 part solution:
(1) "the nation must return as quickly as possible to gold-based money and debt" (Heritage's Policy Review published another piece endorsing a return to the gold standard as a key component of balancing the budget, in the next issue, by the late Congressman, HUD Secretary and Vice Presidential candidate -- Jack Kemp, My Plan To Balance The Budget, Spring 1986)
(2) we should allow "free exchange of gold and silver, both public and private, setting up a parallel monetary system on a free market basis, allowing the public to choose," (Heritage's Policy Review published another piece endorsing the idea of Hayekian currency competition or privatization, also in the next issue -- Richard W. Rahn, Time To Privatize Money?, Spring 1986) and
(3) "the Federal Reserve would be phased back to its original role as a bank-owned clearing house, thus eliminating its huge and costly presence in the money markets where its open market operations now run as high as $1 trillion a year."
With all of the talk about the "fiscal cliff" and raising the debt ceiling yet again, it is clear that the problems of the Federal budget and debt, and especially the cost of servicing the Federal debt, have certainly not gotten any better since Warren Brookes's solutions were published (and ignored) in 1986.
In the opening days of the new session of Congress, a number of bills have been introduced that would partially enact these solutions:
(i) Congressman Paul Broun's H.R. 73 (Federal Reserve Board Abolition Act) and
(ii) H.R. 77 (Free Competition in Currency Act of 2013), both similar to bills previously introduced by Dr. Ron Paul. (Congressmen Broun and Steve Stockman have also introduced bills to audit the Federal Reserve, also similar to bills previously introduced by Congressman and Senator Paul -- H.R. 24 (Federal Reserve Transparency Act of 2013) and H.R. 33 (Audit The Fed Act of 2013)).
We’ll see just how serious Washington, D.C. is about the budget and debt crises.
... In the last 100 years, there has been unbridled recourse to fiat currency. This column draws heavily on a benchmark address by Lewis E. Lehrman on “The Federal Reserve and the Dollar” at the 31st Annual Monetary Conference at the Cato Institute, Washington DC.,US (November 14, 2013).
Lehrman quotes Keynes in “Indian Currency and Finance”, to say that whether a central bank holds its reserves in gold or in foreign exchange “is a matter of comparative indifference …India, in her Gold-Exchange Standard… far from being anomalous, is in the forefront of monetary progress …(heading towards) “the ideal currency of the future”. What glory for India!
... It is difficult to interpret [Jeb] Hensarling’s declaration to hold hearings on “the entirety of their hundred year history and what America has looked like since adopting a fiat currency” as anything but an intention to bring the Commission up for a vote. Hensarling promises to process vast amounts of information. The constraints on a committee hearing, and on a committee staff, cannot do such a huge topic justice. As Rep. Kevin Brady put it in his own remarks at Cato, a “brutally bipartisan” Commission — with Hensarling a Commissioner — is called for.
Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.
By John D. Mueller
The Problem of Say's Law
For several decades, the theories of John Maynard Keynes replaced the classical theory which had dominated policy-making for more than a century until the Great Depression. This brought things full circle, because the classical economists had succeeded the Mercantilists. And the Mercantilists were proto-Keynesian in their contention that, left to itself, the economy has a tendency toward “under-consumption,” which, they argued, must be combated by public spending, combined with measures to increase the money supply.
"Double-entry bookkeeping developed in 14th century Italy, whence the precise, simplified ledger and balance sheet accounting basis for the development of a 'fractional' reserve banking system emerged. In such a banking system a new kind of 'abstract' fiduciary money developed – subject to transfer by checks. They came to be called book entry bank deposits, bank advances, credit money, or checking accounts, sight liabilities, or demand deposits. The banks held bullion or coin reserves against this new credit money. The precious metal reserves were equal to a prudent 'fraction' of the total bank note and deposit money circulation, hence the phrase 'fractional reserve banking system'."
We are pleased to announce the publication of– Money, Markets, and Government: The Next 30 Years.
The articles in Money, Markets, and Government were first presented at the Cato Institute’s 30th Annual Monetary Conference, held on November 15, 2012. The 2008-09 financial crisis and Great Recession have vastly increased the power...
Speaking in Berlin November 21, European Central Bank President Mario Draghi declared: "Let me react towards what is a nationalistic undertone in some of our countries whereby we [are said to] act against the interests of some countries and in defense of our own countries." German members of the European...