Nixon and the Gold Standard

David Westin’s “Balance of Power” show on Bloomberg is often insightful. Today I learned of Jeffrey Garten’s new book Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy. It is a bout President Nixon’s decision to take the US off the gold standard, under which gold had been pegged at $35 per ounce. It was a momentous decision by Nixon, but one that has received less attention than other momentous Nixon decisions: the opening to China, pursuit of the Vietnam War, creation of the Environmental Protection Agency, and of course Watergate. I haven’t read the book, but I should because it’s time someone recognized how important that 1971 decision was. It changed the way the world economy worked. It opened up the global financial system but also made it more unstable. Jimmy Carter got a lot of grief for the high inflation that took place during his administration. I think at least part of it was due to Richard Nixon taking the US off the gold standard, making it much easier for inflation to take place. Markets were adapting to the new reality of depending on the Federal Reserve, rather than the gold in Fort Knox to control the value of the dollar. Central banks around the world became more important. Despite being on the gold standard, Nixon was faced with inflation of over 5%, as well as high unemployment. He was under pressure to devalue the dollar’s price against gold. Wikipedia says that Nixon conferred with recently appointed Treasury Secretary Connelly, Fed chair Arthur Burns, Treasury Under Secretary Paul Volker (later to be Fed chair under Jimmy Carter), and others, probably including OMB chair George Shultz (later to be Secretary of State under Reagan). A Wall Street Journal article said that Fed chair Arthur Burns played only a minor role there and that Henry Kissinger, who may have been preoccupied with China, was not there. Garten says Nixon’s decision showed that the US could no longer support the world economy alone. To Nixon’s credit, he took the initiative, rather than waiting for a crisis when the world came calling all at once to collect gold for dollars and there was not enough gold to pay everybody. Taking preemptive action was the right decision, even if it left Jimmy Carter holding the bag a few years later. Whether it was exactly the right action is debatable, but the United States and the world have prospered in the fifty years since then. In his interview on Bloomberg, Garten mentioned that there are some similarities between 1971 and today. Financial conditions are unsettled today and there is a potential big change in the offing, in the form of cybercurrencies. I don’t think that Bitcoin is necessarily the future of cybercurrencies, but I think some new form of it may be, probably a currency connected in some way to a central national bank, or maybe several central banks. It may use blockchain, or some new improvement for authenticating transactions that uses less energy. Will Bitcoin be to the new cybercurrency what gold is to the dollar? I doubt it, but it could be. Many people are betting that it will be. Will a new international conference set up a new system, as Bretton Woods did after World War II? Or will individual nations set up their own mechanisms as Nixon did in 1971?

Stop Idolizing George Floyd

It is sad that Black Lives Matter has made such a point of honoring George Floyd.  He is a human being and should not have been killed by the police.  However, he was a convicted felon for a violent crime, in addition of being a drug user, a poor father, and generally a failure in life.  He was being arrested for committing a crime while being high on drugs.  He was a drag on the US economy and a bad example of the human race. 

The fact that he is being held up to such esteem by the black race indicates what a terrible state the black race is in.  There are many wonderful black individuals, but the black race looks pretty awful.  Africa is a failed continent, populated by the black race.  Why haven’t blacks made something of Africa.  Latin America is dark or brown because of the black intermarriage, and it too is a failed continent compared to the Northern Hemisphere.  Is the Southern Hemisphere failing because if is Southern, or because it is mainly populated by black and brown people? 

Black and brown people need good models for their race like Colin Powell, not failed criminals like George Floyd.  The fact that they honor George Floyd shows how violent, how uncivilized, how uneducated their race is.  They blame it on white oppression, but slavery ended 150 years ago.  Many blacks left the segregated South, but still failed to succeed in the northern US, turning cities like Detroit into spreading slums.  I would like to see an example of a failing city with a majority white population that improved itself as black people moved in and made it a better city.  I would like to see one; most examples are the opposite – nice cities that ran down as more black people moved in. 

When I was at the American Embassy in Warsaw, Poland, I went down to Silesia to survey the coal mines there and to see what their environmental impact was.  The Pole who was escorting me made a point of taking me to an apartment house lived in by coal miners. He wanted me to see how neat and clean they were at home, despite their dirty occupation.  This is the kind of example the blacks need. I’m sure such an example exists, but I don’t know of it.  Blacks should publicize it, instead of praising a criminal like George Floyd. 

Election Interference

 

President Biden’s meeting with President Putin has brought the issue of election interference back into the spotlight.  Although this is a genuine issue, it is not as serious or one-sided as the Democrats claim it is.  Democrats are obsessed with it because they need someone to blame for Hillary Clinton’s loss to Donald Trump in the 2016 election.  They cannot accept that they lost the election because they ran a bad campaign on issues that did not appeal to the American people.  The Democrats failed to understand that there are millions of Americans who are very unhappy with the policies pursued by Democrats. 

To me, one of the main failures of the Democrats was their policy on immigration.  When I served as a US vice consul in Sao Paulo, Brazil, I felt that one of my main duties in issuing tourist or immigrant visas was to avoid giving visas to people who were going to be a drain on the United States.  Under US law, the US was open to people who could support themselves and make a contribution to the success of the country, but it was not open to people who were going to become a “public charge” by going on welfare after their arrival.  Immigrants also had to have a job or skill that would not displace an American worker.  Many of the people currently being admitted to the US will be public charges, at least for several years.  Adults will have no jobs at first.  Unaccompanied children will have no one to support them for years.  They are unskilled and the jobs they eventually get will probably not be very productive.  Many Americans support generous immigration laws, but current Democratic policies ignore the existing laws and just let people in.  If the US wants more generous immigration laws the Congress should pass them, and the administration should enforce them.  Currently there are restrictive laws and no enforcement. 

Trump recognized that the Democrats had alienated a large part of the electorate by promoting free immigration.  Economically, he wanted to reduce many restrictions on American business, such as taxes and regulations.  Hillary’s main appeal was to intellectuals on the one hand, and to Hispanics and blacks on the other.  She and the Democrats ignored the great American middle, which ended up electing Trump. 

Putin or his henchmen did not do anything that American political players have not done.  Dirty tricks are part of electoral politics.  So, would it be okay if the Republicans did the same thing to the Democrats that Putin did?  What the Russians did may have been somewhat illegal, but it was not egregious.  It was sad that so many silly Americans were influenced by it, but that’s the fault of the American education system, not Putin.  So, the main offence was “foreign” interference.  But Putin over the years he has been in power has certainly seen what he would interpret as American interference in Russian elections and in his other efforts to retain power.  We say we only want fair elections, but Putin sees it as a direct attack on his leadership.  He maintains power by undemocratic means, but he does not share Americans’ attachment to free and fair elections.  There have been very few free and fair elections in the thousand years of Russia’s existence.  We say we are spreading democracy; Putin says we are interfering in his government.  Should the CIA inspire Russian citizens to rise up and assassinate Putin, and if not, where do we draw the line on what is proper or improper in interfering in Russian politics?  He

In an ideal world, Putin would mind his own business, but this is not an ideal world.  The US is not perfect.  Black and brown Americans shout their condemnation of America from the housetops.  Putin quoted American protesters in his meeting with Biden.  In theory, American democracy is strong enough to withstand criticism from Putin and from domestic protesters.  Let’s hope that it is. 

Argentine Inflation

 

From an Economist Magazine newsletter: Argentina releases its monthly report on consumer prices today. High inflation is a persistent problem for the country. In April, the year-on-year figure was a staggering 40.3%. Food costs play a significant role in Argentina’s inflation, and attempts to reduce them have pushed the government into a bitter battle with the farmers who supply the country’s famous bife. Last month Alberto Fernández, Argentina’s president, slapped a 30-day ban on meat exports. The country is the world’s fifth-largest exporter of beef and Mr Fernández hoped a glut would help freeze domestic prices. His plan temporarily backfired when the cattlemen went on strike, reducing supply, and prices rose. They have since levelled off. The government must decide whether to extend or re-work the ban to allow some exports. Producers warn that thousands of jobs are at stake if the president does not stop trying to cure the meat market for his own ends.