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| Herman Cain |
Cain, speaking Wednesday in an interview with The Journal, said he is “very committed” to sticking with the process of being vetted by the White House as it considers whether to formally nominate him for the position.
“I happen to believe that you need some new voices on the Federal Reserve,” he said.
“I don’t quit because of negative criticism,” Cain said. “I don’t quit because of negative attacks. And I don’t quit because several senators have expressed reservations about my qualifications.”
It will be an uphill battle for Cain. Four Republican senators said last week they wouldn’t support Cain due to concerns about his conservative activism and sexual-harassment allegations, which he has denied. That is enough to sink his nomination if Senate Democrats, as expected, vote in bloc against him along with 2 independents. As things stand now, he will have to flip at least one of the four Republicans now openly against him or a Democrat or independent to gain confirmation.
It is difficult to know what to think about Cain, he appears to be an inflationist that would vote in favor of greater money printing. On the other hand, his views on a gold standard as expressed in his book, 9-9-9: An Army of Davids, are not perfect but pretty sound.
If he handed in his chapter in the book as a student paper and I was teaching him, I would give it a B+. That said, his co-author is an economist, Rich Lowrie.
Maybe it was Lowrie who wrote that chapter and Cain's role was to read the chapter and slap Lowrie on the back with a "that a boy."
If I knew Cain was going to support at the Fed the gold standard that he outlines in the book, I would support him now. His steps to a gold standard are not that bad. It would be better than anything we have had seen at the Fed in a very long time.
But something suggests that Cain is not that sound on the gold standard as the chapter in his book suggests.
In a new op-ed in The Wall Street Journal, he seems to be moving toward commodity index stability as his current goal.
He writes:
The Fed has the tools to stabilize the dollar. The open-market desk can buy bonds to counter a downward trend in commodity prices and sell bonds to arrest an upward trend, resulting in ongoing stability in the dollar’s commodity value...
Last September the professor standard led Fed governors to pick up the pace of quantitative tightening and stick to its plan of rate hikes. Never mind that commodity prices were falling, meaning the dollar’s commodity value was rising, a market signal of deflationary pressure.
Meanwhile, the forward outlook for industrial production and retail sales indicated signs of slowing rates of growth. This combination of slowing growth and a rising dollar is a deflationary slowdown. These are the worst conditions under which to raise interest rates, yet that’s what happened, not once but twice, presumably because wage growth was deemed “too strong.”
Markets rightly sent the Fed a strong signal to back off, prompting three subsequent dovish pivots. If the Fed listens to markets after the fact, why not listen to them before?
This mistake is not new. Had the Fed responded appropriately to the dollar’s commodity value at the turn of this century, it wouldn’t have tightened the U.S. economy into the 2000 deflationary slowdown, and technology speculation would have resolved itself without taking down the entire economy.But commodities can move around for all kinds of supply factor reasons that have nothing to do with dollar-commodity stability--if dollar-commodity stability were a sound goal in the first place which it is not.
I am not going to lose much sleep over Cain if he doesn't get Senate confirmation. It would be great if a diehard gold standard man were to join the Fed, but Cain does not appear as though he would he be as sound as the chapter on the gold standard that is in his book.
-RW
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