“Barry Eichengreen of the University of California at Berkeley, the National Bureau of Economic Research, and the Center for Economic Policy Research is without a doubt the world's leading expert on the international monetary economics of the Great Depression of the 1930s and, by virtue of that expertise, an expert on today. He is the only one still living of the four economists--Bagehot, Minsky, Kindleberger, and Eichengreen--whom last year Larry Summers told Martin Wolf knew the most about what has happened to the world economy since 2007.”Wow. And my sister-in-law Wendy gets to play flute with him. Cool.
Thanks to Wendy and her husband Pat I just ran across his article in The National Review reviewing the Ron Paul arguments for why we should return to the gold standard. Although the Ron Paul delegates are acting up at the GOP convention today, Paul Ryan, of course, is the current poster child for this brand of nonsense. So, although the article is a year old, the arguments are timeless and the GOP adoption of a proposal to study a return to the gold standard at the current convention gives it fresh currency.
Eichengreen is very, very polite. But the inescapable conclusion he leads us to is that the Paul Ryan school of economics which advocates a return to the gold standard is bankrupt of good ideas. After examining the pro-gold standard arguments with patience to a fault, Eichengreen's bottom line is that there is no argument to be made for it. He is the kind uncle to Krugman, DeLong, and Reich’s more hot tempered (and entertaining) manner of family feuding.
The Ryan prescription for stimulating the economy--and is it or is it not Romney's now--is for government to do nothing. Romney/Ryan want to be the do nothing team! Boehner/Cantor want to lead a do nothing Congress. Trouble is, as Eichengreen points out, doing nothing in time of economic depression inflicts pain on everyone through severe unemployement. Economists actually do know some things, and one thing they know is that inflicting pain by severe unemployement is not the best way to curb the over-exuberance of financial markets. They also know that precipitating depression, as Ryan's medicine would do, is not the most expeditious way to cure bank and corporate balance sheets.
It's better for government to act proactively to stabilze economic activity and to encourage strong expansion of the economy so debtors can grow out of bad debt. It's better for government to help the economy recover now and regulate better later.
The modern GOP prefers for government to regulate worse now, regulate less in future, and precipitate deflation now through deep spending cuts. They would like to enact measures, like returning to the gold standard, that would prevent future Fed holdings and that would prevent significant Fed involvement in the economy in future. So says the news. So says Eichengreen, politely.
These people don't deserve such politeness.