Here Louis Woodhill, economic writer par excellence and member of the Club for Growth Leadership Council, counters Fed Chairman Ben (The Bernank) Bernanke's recent defense of printable money with a very simple argument. If, as The Bernank believes and his academic work supports, the Fed caused the Great Depression, why isn't the Fed's monetary tinkering responsible for the crippling Great Recession and the succeeding Runt Recovery? He's almost certainly right that seven or, in our present case for some reason unknown to me, five economic wizards in charge of the money supply from a Washington conference room must bear a substantial part of the responsibility.
Woodhill's main focus, though, is on The Bernank's simultaneous attack on the gold standard because of its performance in the early 1930's. Woodhill doesn't disagree that the gold standard caused problems then, but he advocates a new monetary strategy -- in effect a new gold standard. He supports Congressman Ted Poe's proposal for using the Fed's open market operations buying and selling Treasury debt to achieve a near constant value of some gold market index.
I don't want you to think I'm a gold bug, but I do think that commodity prices are a good solid measure of inflation, AKA a rise in the general level of prices. And connecting the money throttle to a commodity index is an idea well worth considering.
Whether gold is the right commodity remains to be seen. Central banks currently hold a very high percentage of the world's gold stocks -- upwards of 80% and over twenty years production at current rates if memory serves -- so for a time at least, they'd still be able to manipulate the money supplies. Furthermore, allowing the industrial supply and demand for gold to play a role in determining the money supply does seem a bit odd.
