Wednesday, April 17, 2019

Tyler Cowen on Why He is Against a Gold Standard

Tyler Cowen
This really boggles the mind.

Koch-funded Tyler Cowen, who was once considered the next Murray Rothbard, writes in his latest Bloomberg column the three reasons that he is against a gold standard.

"First, governments have a long history of interfering with gold standards, for better or worse," he writes. This is absurd. Cowen is against the gold standard because of government interference, so he wants an unchained government fiat money instead?

Gold standards have always put some kind of check on government money printing. This is why governments always attempt to move away from a gold standard. There can certainly be plenty of money printing cheating if a gold standard is not constructed correctly but it is almost always better than a fiat money system unconnected to gold.

Cowen goes on to say, "Second, central banks should respond with extreme countercyclical pressure when a financial crisis hits, such as in 2008. That is harder to do with a gold standard, and usually it requires the suspension of gold convertibility."

This is pure Keynesian coprolite. This is the best evidence we have that Cowen has become just another apologist for the state. And he actually contradicts himself here relative to his first objection. Because now he says it is harder to expand the money supply when there is a gold standard.

"Third," he says, "the price of gold is now greatly influenced by demand from China and India, and it seems unwise for that to partially drive what is in essence U.S. monetary policy."

But Chinese and Japanese purchases of fiat dollar-denominated debt play an important role in monetary policy now. Such purchases make it much easier for the Federal Reserve to manage monetary policy.

If foreigners ever started dumping dollar-denominated securities, the monetary printing by the Fed would be at full blast 24-7.

This is Cowen so he does dance around in the column ending with this:
 Oh, but wait — I forgot one big new argument in favor of a gold standard: President Trump himself. Perhaps his management of central bank affairs is somewhat … erratic? Might it not be a good idea to have the operation of monetary policy protected by a greater reliance on rules? My personal preference is for a nominal GDP rule, but the irony is this: At the end of the day, the advocates of the gold standard, and their possible presence on the Federal Reserve Board, are themselves the best argument for … the gold standard.
But, of course, what Cowen fails to explain (but maybe hints at) is that Trump's nominees to the Federal Reserve are not true gold standard advocates. Both nominees, Cain and Moore, have at different times advocated for a gold standard but, clearly, their advocacy is for a fool's gold standard, since they are both also in favor of aggressive Fed money printing. You can't be in favor of a true gold standard and aggressive Fed money printing at the same time. That is like dressing for a summer day at the beach and a winter blizzard at the same time.

Cowen's call for a nominal GDP rule, on the other hand, is dressed up Keynesianism that can't possibly work without major eventual Fed-cause economic crises.

Bottom line: Moore and Cain would be bad for the Fed but so would Cowen.


1 comment:

  1. I think if Mr. Cowen had any integrity, he wouldn't be writing for Bloomberg and he would not appear in the New York Times. As Matthew Yglesias once described him, he's a thoughtful mainstream libertarian.