The Corner

Gilder, Gold, and Me

George Gilder has a new monograph, The 21st Century Case for Gold. I was only a few paragraphs into it when I came across this passage:

From Paul Krugman’s columns to National Review’s conservative cerebrations, monetarists imagine that the absence of severe inflation falsifies the idea of a gold standard or any other monetary constraint outside of the wisdom and discretion of bankers. A consensus of establishment theorists uphold the principle of shielding the Federal Reserve from politics in order to allow the central bank to continue on its vital path of monetary manipulation.

I’ve read most of what National Review has published on monetary policy over the last 20 years, and written some of it. This passage did not ring true.

Reading along in the chapter, I ran across a denunciation of “monetarism” defined as the belief that the velocity of money (the rate at which it changes hands, or more precisely the ratio of nominal spending to the money supply) is constant. This view, he explains, has been thoroughly refuted:

We now know without a doubt from empirical evidence that velocity is not constant. Not even close.

Through most of the 21st century, velocity has been anything but constant, falling like a rock one year, soaring like a rocket the next.

Along the way to that revelation Gilder refers to an article by David Beckworth and me that supposedly “strongly endorsed” monetarism. A quick search through the monograph finds that no other NR article is mentioned in it; our article must be the “cerebration” in question.

That article did not at any point suggest that “the absence of severe inflation falsifies the idea of a gold standard or any other monetary constraint outside of the wisdom and discretion of bankers.” It actually called for constraining the discretion of central bankers. It did not claim that velocity is constant; it contains four graphs showing how much it has changed.

Nor do Gilder’s descriptions bear any resemblance to anything else I have written. See this recent article, for example, where I assail rather than “uphold the principle of shielding the Federal Reserve from politics” and argue, again, for constraining its discretion. Or this article from NR’s website, where I say “velocity isn’t stable.” I am quite confident that I have not said any of the things Gilder suggests, because I have never believed any of them.

It is true, however, that the article Gilder cites mentions the gold standard negatively: “Countries recovered from the Great Depression in the order that they exited the gold standard of the time, which is a major reason most economists no longer favor that monetary regime.” Neither half of that statement appears to be challenged in Gilder’s monograph: I searched for “Depression” and “1930s” (and close equivalents) and found two passing, off-point references.

As that comment may suggest, I have not read the whole monograph. But I would not have great confidence in Gilder’s characterization of debates over monetary policy.

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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