Monetary Disorder: Move Over, Mandarins.

• Author: Grant, James
• Position: Obamacare as test of political marketplace

You remember Jonathan Gruber. He was the brainiac from MIT who helped to design Obamacare and who credited the "stupidity" of the American electorate for its happy enactment (DelReal 2014).

I think of Professor Gruber in the context of the proliferating plans to reinvent our monetary and banking institutions. We critics have been champing at the bit for the opportunity that Donald Trump was good enough to hand us on November 8. Surely, this is the moment for new thinking. What can we contribute?

New Thinking

We don't lack for ideas. Audit the Fed. Collapse its bloated balance sheet. Abolish Humphrey-Hawkins. Repeal Dodd-Frank. Normalize interest rates. Let the stock market find its own level. Stop taxing gold as if it weren't money (it is money). Strike the Federal Reserve governors mute.

So many opportunities. So much need. Where to begin? May I suggest a preliminary consultation with the president? But, before even that essential courtesy call, an extended listening tour among the American people? Only think of the trouble that Professor Gruber might have saved himself if he had asked the customers what they wanted.

I happen to be partial to fixed exchange rates, a convertible dollar, and the responsibility of the shareholders for the solvency of the banks in which they own a fractional interest. I believe that money should be an objective measure of value, not a magic wand, and that the price mechanism, not the FOMC, should determine bond yields, price-earnings ratios, and cap rates. I support free-range interest rates, not the cage-grown variety. In short, I favor many of the forms and institutions in place a century ago.

Not unlike Professor Gruber, I have made a study of the situation. I believe I can defend the seeming paradox of seeking progress by restoring what was "excellent, if not perfect" (to steal a line from Alexander Hamilton) (Hamilton and Rossiter 1961: 441).

There is a small problem. I can't help but notice that America seems not to be on board just yet. In the not always edifying presidential debates, the Federal Reserve was almost a nontopic. The public debt, the astonishing growth of which the Fed's ultra-low interest rates have facilitated, likewise got the silent treatment.

I wonder what's come over us. In ages past, money and banking were fighting words. To its critics in the early 19th century, the Bank of England literally had blood on its hands (this was a time when offering a fake bank note was a capital crime and the Old Lady of Threadneedle Street had a voice in granting clemency to, or withholding it from, convicted counterfeiters) (Fetter 1965: 95). To Andrew Jackson, the Second Bank of...