The classical gold standard — an early casualty of the First World War — was not, indeed could not have been, the culprit. There is a subtle yet crucial distinction between the gold-exchange standard, which indeed precipitated the Great Depression, and the classical gold standard, which played no role. There is much to be said for the classical gold standard as a policy conducive to equitable prosperity. It commands respect, even by good faith opponents.
For the discourse to proceed we first must lay to rest the Eichengreen Fallacy (and all that is attendant thereon). Once having dispelled that toxic fallacy let the games begin and let the best monetary policy prescription win.
Also, 90 years ago today Calvin Coolidge was elected President. Matt Lewis interviews Author and historian David Pietrusza, listen to it here:
But the bigger theme is the need for the U.S. and the world to return to the free-market, free-trade, entrepreneurial, supply-side, tax-incentive model of growth with stable money. That model worked during the Coolidge-Mellon 1920s, the JFK 1960s, the Reagan 1980s, and the Clinton 1990s.
If nothing else, a new Republican Congress must message clearly that the U.S. will stop the recent leftward economic lurch. It’s not hard to pinpoint what’s gone wrong, propose positive solutions, and argue that the economic ship can be righted fast.
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So let me optimistically argue that the slow-growth economy can be rescued and the fiscal and monetary mistakes can be reversed. Lower tax rates, less spending, deregulation, and a sound dollar will do it. The GOP can make this case — and right away.
And if the Sandinista Democrats would read a little history, they’d see I’m arguing for the JFK model of growth — which was the forebear of Ronald Reagan’s supply-side revolution.
It can be done.
Also, Larry Kudlow interviewed Jeff Bell this morning on his national radio show. Listen to the interview here:
Harding appointed Mellon as Treasury secretary, and Mellon adroitly rescheduled the debt; Harding and Mellon also passed a round of tax cuts. Harding was not a “naysayer” by temperament. He disliked using the veto on his old Senate colleagues. He appointed friends, rather than professionals, to key posts. Their corruption tainted his reforms and aborted them.
Few reckoned that Coolidge could continue or complete what Harding had started. Voters figured Coolidge was a lame duck, “the accident of an accident.” The real Republican candidate would emerge in 1924. Coolidge’s colleagues in Washington didn’t expect much either: “Coolidge had little about him that was regal,” recalled George Wharton Pepper, a senator of Pennsylvania.
Still, Coolidge pushed forward where Harding had hesitated. He and Mellon sought and received several more rounds of tax cuts, bringing the top marginal income tax rate down to 25 percent, a level even lower than Reagan’s. In his years observing railroads, Mellon had noted that when you cut the toll for a rail line, you might get more business. An owner charged, as Mellon put it, “what the traffic will bear.”
Mellon thought the same principle might apply to tax rates. Perhaps lower rates would permit more business activity and therefore bring higher revenues. Today we call this philosophy “supply-side economics.”
Profits up, rates down, tax cuts, and a stock rally. How about some optimism.
In fact, since 2001, business profits have doubled, even while the stock market dial has hardly moved. If Washington can just keep its paws off of business and let market processes work, firms will continue to prosper domestically and internationally and will eventually pick up their hiring.
I hate to sound too much like Calvin Coolidge, who after Reagan is my favorite 20th century president, but the business of America is business.