On Friday, I numbered among the twenty-some self-styled conservatives, organized by Steve Lonegan, who gathered at the headquarters of the Federal Reserve to meet with Chair Janet Yellen and governor Lael Brainard. (Steve is Director of Monetary Policy for American Principles in Action.) We met for an hour, with a selection of us giving remarks for seven minutes apiece. I was one of those speakers. Here I publish the remarks, verbatim, that I gave, twenty minutes into the meeting:
“Since 1971, and the end of official gold convertibility, the United States has oscillated between two general kinds of monetary policy. The one kind is discretionary. The other kind is identifiable by its salient effect: of freely chosen commodity prices, especially gold’s, staying at low and stable levels in the markets. It is proper to call the second general kind of monetary policy, the kind that conduces to low and stable gold and commodity prices, a ‘classical’ monetary policy, and the discretionary kind ‘less’ or ‘non-classical.’
“Those monetary systems that maintain the de facto nature of convertibility with the unformed materials of the earth, with geology, are those that are more classical than their alternatives. We should be curious about this distinction because of one deep historical reality that is associated with it. This is that since 1971, the more classical the monetary orientation, the greater the economy has performed; and the less classical the monetary orientation, the more the economy has faltered. This is, perhaps, the central generalization that we can make about the relationship of monetary policy to the economy at large in the era since Bretton Woods.
“The oscillation unfolded over the decades as follows. After the end of gold convertibility in 1971, monetary policy came into its discretionary, non-classical season. Then in the 1980s and 1990s, a shift occurred. The run-up in the dollar prices of gold and oil (and land and many other fruits and characteristics of the unformed earth) that had characterized the 1970s reversed course. Commodities and gold settled to low levels and stayed put within a tight range, for 17 years, from 1983 to 2000.
“The second shift, a move to the status quo ante, occurred after the year 2000, when discretion in monetary policy superseded de facto stabilization of gold and commodities. The prices of gold and commodities, in turn, as in the 1970s, shot to new highs and explored new ranges of volatility.
“Over the forty some years since 1971, two sets of two decades mirror each other. The 1970s and the (now long) 2000s have proven eras of monetary discretion, and the 1980s and 1990s were those of classical policy, classical de facto if not de jure. Moreover, just as the 1970s and the 2000s are like to each other in being less classical in monetary orientation, so did the 1980s and 1990s jointly recall the decades of Bretton Woods: both of these eras were more classical in monetary orientation.
“Economically, the effects were startling in their contrasts. In the 1980s and 1990s, growth was high, recessions rare (there was one from 1982 to 2000), entrepreneurialism common, and jobs abundant. In the 1970s and the 2000s (through today), recessions were either frequent or their recoveries slow and shallow, un- and under-employment sampled new high levels, and investment went into primary inputs ranging from oil to land (and gold) to an uncommon degree.
“What can the connection have been all along, between the degree of classicalness of monetary policy and economic performance? In the era of the near-classical monetary standard, the economy enjoyed a long rush of investment into the production of finished goods and services, into ‘real’ purposes that help human beings live better. In the non-classical eras, investment in primary inputs to the exclusion of finished production of other goods was so great that it took on the aspect of a distortion.
