The Committee on Monetary Research and Education met on October 16, 2008 at the Union League Club of New York. The surroundings lent historical background to the discussion. After decades of a sound monetary system, the Secretary of the Treasury, Salmon P. Chase, introduced a national banking system in 1863 to try to shore up the weak finances of the Civil War. In order to try to market US treasuries, banks purchasing the bonds could issue large proportions of credit. The government flooded the US with unbacked Greenbacks. The bankers and bond dealers in 1863 formed Union League Clubs in major cities to join forces to market the bonds in the face of popular opposition to deficit spending. Many of these financiers were wiped out by the Panic of 1873. Meanwhile, Chase who had been appointed by President Lincoln to succeed Roger B. Taney as Chief Justice of the United States voted to declare his Greenbacks as unconstitutional.
The Committee on Monetary Research and Education was founded in the aftermath of the ending of gold backing for US dollar by President Nixon in 1971. The CMRE was a successor to the Economists’ National Committee on Monetary Policy founded in 1933 by Professor Edwin Walker Kemmerer (1875-1945) of Princeton University in response to FDR’s ending of the gold clauses in commercial contracts. Robert A. Taft and other constitutional lawyers sought unsuccessfully to have the US Supreme Court to continue to recognize the principle of Roman Law: pacta sunt servanda (contracts are made to be honored).
Kemmerer was the author of Kemmerer on Money: An Elementary Discussion of the Important Facts and Underlying Principles of the Money Problems Now Confronting the American People (1934), as well as Gold and The Gold Standard (1944). CMRE has published many books such as G. Carl Wiegand, The Menace of Inflation (Devin-Adair, 1977); Melchior Palyi, The Twilight of Gold, 1914-1936 (Regnery, 1972); Henry Hazlitt, From Bretton Woods to World Inflation (Regnery, 1984). CMRE has published more than fifty monographs by experts such as: Henry Hazlitt, Jacques Rueff, Hans Sennholz, Arthur Shenfield, Vera C. Smith, Philip Nataf, and Donald L. Kemmerer’s The Gold Standard and Economic Growth.
One presentation at the conference was by Professor Emeritus Antal Fekete of Memorial University of Newfoundland. His talk focused on the Federal Reserve as “The Mechanism of Capital Destruction.” Low interest rates have destroyed savings.
Fekete had noted: “gold is the most abundant commodity known and produced by man. Contrary to popular belief, gold is not scarce at all and does not owe its value to its alleged scarcity. Gold owes its value to the fact that, in spite of its abundance and steady increase in its abundance, it continues to be in universal demand. No other asset can match gold’s record in this regard.”
Fekete reports: “The international gold standard that encompassed virtually the entire globe by 1900 was the paragon of peaceful and voluntary commercial cooperation. It did not include foreign exchange markets as we know them. There was no market where dollars, pounds and francs were traded against on another. Instead, there was only a market of bills on London. These “real bills” represented real goods on their way from the producer to the ultimate cash-paying customer. …The international bill market was free from government intervention. Central banks participated in it on a strictly commercial basis, as did everyone else. …
“The international bill market was the first casualty of the Guns of August 1914. After World War I governments did not allow the international bill market to make a comeback. In most countries government agencies rationed foreign exchange.”
My files revealed the cover headline of The Economist (April 24, 2004): “The End of Cheap Money.” The lower value of the US dollar emphasized the rise of inflation. US interest rates would have to rise to maintain economic health. Instead, Chairman Alan Greenspan allowed falling interest rates and further destruction of capital. In opposition were presidents of regional Fed banks. Bill Poole, president of the St. Louis Fed, warned about inflation, as did Bob McTeer, president of the Dallas Fed. These warnings were not heeded as the Administration preferred the false sense of prosperity engendered by the narcotic of cheap money. Politicians hope to pass the inevitable consequences of the Bubble to succeeding politicians.
CMRE – May 20, 2010 – Union League Club of New York
Topic: “Is the Dollar a Zombie?”
CMRE distributed a re-print of an article based on CMRE conference in 1974 by Professor G. C. Wiegand of Southern Illinois University published in two parts in The Commercial and Financial Chronicle in New York, December 16 and 23, 1974.
In his wide ranging presentation Wiegand noted that between 1922 and 1930 more than 400 foreign bond issues were floated in New York (not counting Canadian issues). Close to 70 per cent eventually fell into default, wholly or in part. In the 1960s more than 300 foreign bond issues were issued in Germany and by 1974 they were selling at more than 12 per cent yield. During the 1970s under a socialist government in Germany, the Bundesbank permitted the Herstatt bank, the largest private bank, to go under with heavy losses putting all banks on noticed that the tax payers would not save them from bad decisions. However, Treasury Secretary William Simon implied US would assist any major Eurodollar bank which fell into trouble.
The chairman of the first May 20, 2010 session David Tice of Federated several times mentioned his reliance on Austrian School monetary analysis and policy. He introduced James Grant of Grant’s Interest Rate Observer and recent Wall Street Journal feature: “Requiem for the Dollar.”
Grant reviewed the current dismal world monetary situation. While the focus is on Europe, he examined the failures in US government decisions. He continues to view gold as a necessary solution to the bad monetary policies.
Jack Willoughby, senior editior at Barron’s weekly, expanded on his speech to CMRE two years ago: “The Mess in Europe and Why Will it Likely Get Even Messier.” He was doubtful that Europe had found an answer to its problems.
Walker Todd, former Federal Reserve staffer and currently a scholar at the American Institute for Economic Research, discussed the legality and practicality of the recent actions of the US Federal Reserve Bank.
Sean Fieler discussed his chairing of the American Principles Project and his recent Wall Street Journal article: The Gold Standard: the Case for Another Look.”
Ambassador to European Community (former) William Middendorf, chairman of CMRE and trustee of Heritage Foundation (and participant in the annual monetary conference of Robert Mundell in Tuscany) introduced David M. Walker and William Beach.
David M. Walker is now president of the Peter G. Peterson foundation and former US Comptroller of the Currency. He concentrated on the need for drastic cuts in US government spending in order to gain economic stability.
Bill Beach is the director of Heritage Foundation’s Center for Data Analysis. Beach gave an excellent examination of the many failures and wrong turns of the Congress and the Administration creating the current crisis. A full text of Beach’s information is available on the Heritage website.
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