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The Sound Money Project takes on the Fed at the Jackson Hole Summit

September 1, 2015
in Blog

From left to right:Sound Money Editor Johannes Schmidt, Dr. William Luther of the Sound Money Project, U.S. Senate Banking Committee Chief Economist and former Sound Money Project Fellow Dr. Thomas Hogan, Atlas Network Senior Fellow and Sound Money Project Co-Director Dr. Judy Shelton, Atlas Network President Alex Chafuen, and Sound Money Project Manager Gonzalo Schwarz.

Money has become so far removed from public debate that everyday citizens seem to have forgotten the importance that the Federal Reserve plays in their lives and in their futures. That’s why, this past weekend down the road from where the Kansas City Fed held its yearly Economic Policy Symposium, Atlas Network partner the American Principles Project (APP) hosted the first Jackson Hole Summit. There, economists, policy makers and sound money advocates gathered to “challenge the policies of the Federal Reserve System and to hold the Federal Reserve accountable for the impact of today’s monetary policy on the nation’s economy,” as Steve Lonegan, director of monetary policy at APP and summit organizer, stated in his welcome address.

The organizations represented at the summit included the Heritage Foundation, the Council on Foreign Relations, the Cato Institute, the British Parliament, the U.S. Congress, and Atlas Network’s Sound Money Project. As the first of its kind, this conference was by all measures a success. Not only did it sell out two weeks in advance and attract press from across the country, but also brought together advocates of monetary reform and challenged them to address monetary policy in a way that could easily reach the general public.The Jackson Hole Summit took an important first step in making monetary policy, formerly the “currency debate,” a mainstream issue once again. This is important because, for years now, politicians have made monetary policy an issue that is incomprehensible for the majority of Americans, although it affects their day to day lives, both in the short and long terms. From buying bread at the grocery store to paying off mortgages, the value of money plays a fundamental role in the lives of hundreds of millions of Americans. Furthermore, discretionary policies mean that Americans cannot effectively plan ahead, instead wasting time and resources because the purchasing power of their money is not stable.

Although money is largely absent from public consciousness today, it should be noted that this was not always the case. Elections have been won and lost over monetary issues, and monetary stability affects everybody’s life. It is therefore “important to challenge the privileges, prerogatives, and the power of central banks,” argued Dr. Judy Shelton, co-director of Atlas Network’s Sound Money Project, in an interview with the Wall Street Journal. “I think that having a conference to bring up the possibility that central banks are not the solution, but actually the problem in terms of regaining real economic growth, is vitally important.”

Fortunately, throughout the course of the summit, the speakers did just that. The first lecture, “Government & Money: A Historical Perspective,” was given by Dr. Lawrence White of George Mason University. There, Dr. White explored the history of money in the United States and set the tone for the conference by suggesting that inflation rates under gold had remained relatively stable, and that “price level uncertainty has been much higher under the Federal Reserve than during the pre-Fed period.” Certainly, such conclusions were not likely be reached by central bankers just down the road at the Fed’s symposium, although some central bankers both here and abroad are beginning to question the effectiveness of central bank discretion.

In the first Sound Money Project lecture of the day, however, Dr. Shelton did raise that necessary though still provocative question: “What if Central Bankers Are Wrong?” Throughout her lecture, Dr. Shelton noted that the world’s largest economies are currently operating under different monetary regimes, manipulating their currencies and undermining international monetary stability. Contrary to what some central bankers might believe, that does not constitute competition, but rather cheating. The world needs rules, but as Dr. Shelton noted in a recent article published in The Hill, “there’s only one problem with warning nations not to manipulate their currencies and to play by the rules: There are no rules.” Because of this, the world has not known a system where free trade was based on genuine value since the collapse of Bretton Woods in 1971.

A later panel, titled “A National Monetary Commission to Chart the Uncharted Monetary Territory,” discussed the plausibility of reestablishing a national monetary commission where experts could provide testimony on the Fed’s performance in terms of output, prices, employment and overall financial stability. The participants, Dr. William Luther of the Sound Money Project, U.S. Senate Banking Committee Chief Economist and former Sound Money Project Fellow Dr. Thomas Hogan, Ralph Benko of APP, and Dr. Norbert Michel of the Heritage Foundation argued that a commission could garner public interest in the Federal Reserve’s record and also put pressure on politicians to analyze the Fed’s performance as a lender of last resort. As Dr. Luther sagely noted, if we had had such a commission in 2008, “perhaps it would have allowed us to avoid or at least mitigate some of the monetary missteps that we experienced during that period.”

Later, in a panel titled “The Impact of Fed Policy on Millennials,” I had the opportunity to join Jared Meyer of the Manhattan Institute, Jiesi Zhao of the Young America’s Foundation, and well-known libertarian blogger Julie Borowski in a discussion of how the Fed’s discretionary monetary policies affect young people. Here, the panel concluded that Fed discretion and economic activism disproportionately affects millennials and makes it harder to reach traditional milestones such as getting a first job, buying a house, or even getting married. As Jared Meyer noted, “the Fed picks winners and losers through its policies and the young are consistently the losers.”

The panel also offered me an opportunity to speak about the history of the morality of money and to call on millennials to help reclaim money’s moral high ground. As I stated in a recent piece published in Townhall Finance, “for those who are interested in living in a just and moral world, the idea that money should not be debased or manipulated should come as naturally as the idea that theft and plunder are wrong.”

The final Sound Money Project panel was moderated by Dr. Alejandro Chafuen, co-director of the Sound Money Project and president of the Atlas Network. There, Dr. Chafuen led British MP Kwasi Kwarteng, Dr. Judy Shelton, and Mercatus Center Vice President for Outreach Maurice McTigue in a discussion of “The International Monetary System and the Frontiers of Reform.” This panel provided the audience with an international perspective of the direction in which international monetary policy should take.

One concept that was particularly well received was Dr. Shelton’s “gold-convertible” Treasury bonds. As Breitbart explained, “The bonds would be equivalent to regular 5-year Treasuries, but the face value would be redeemable at the option of the bondholder into dollars or a fixed amount of gold. Bondholders would gain protection from losing purchasing power, and the government would be able to pay much lower interest costs.”

Perhaps the best embodiment of the spirit of the conference were Dr. Shelton’s concluding remarks, during which she questioned the Federal Reserve system in a pointed and uncompromising manner, reprinted in New York Sun editorial:

We dare to talk about the gold standard and its relative merits, knowing that the merest whisper of a gold standard is enough to elicit the guffaws of the central bankers down the road. Because they say “that’s just crazy.” And I think, really? Crazier than negative interest rates? Crazier than paying banks to keep loanable funds in sterile depository accounts at the Fed? Crazier than having the Fed buy up trillions in government debt, remit the interest payments back to treasury, and then count that as revenue to the federal budget?

Is it crazier than having hordes of financial market analysts parsing every word uttered by a monetary official, obsessing over the minutes of the latest Fed meeting trying to glean clues about what might happen next? It’s almost as if we’ve forgotten how to engage in free enterprise, because we’re waiting for marching orders from a central planning agency. I think we’re the rational ones. They like to brand us as ideologues, but in truth we’re the realists. And that sobering fact is becoming clearer every day as reality continues to whipsaw global markets.

The success of the Jackson Hole Summit should allow proponents of sound money to rest easy knowing that there are individuals ready once again to bring the cause of money to the mainstream. The Sound Money Project is committed to remaining on the forefront of that public policy battle and, surrounded by such passionate allies, I am sure that we will see success in a not-so-distant future. After attending the Jackson Hole Summit, it is clear to me that the age of discipline and a rule-based monetary system is once again on the horizon.