Benko on Roll Call: Monetary House Built by Nixon Should Go

Dear Monetary Policy Observers,

What do the gold standard and our trade relationship with China have to do with each other?  Our Senior Economics Advisor Ralph Benko tackles this question in the below article, which appeared as a special in Roll Call this week.  We hope you find this material of interest.


Nicholas Arnold
American Principles In Action


roll call logo Benko: Monetary House Built by Nixon Should Go
  • By Ralph Benko
  • Special to Roll Call
  • Oct. 6, 2011, Midnight

While Republican presidential candidates were trading jabs on TV late last month, Sen. Charles Schumer (D-N.Y.) was stealing what should have been the Republicans’ fight plan.

Schumer, ever alert to the media possibilities, joined with three Senate colleagues to refocus attention on China’s currency manipulations and the resulting injury to American exports.

The Republican presidential aspirants have a short memory. In the last cycle, the most powerful independent political ad, one that went viral with more than a million YouTube views, was titled “The Chinese Professor.” A near-future Chinese professor asks, “Why do great nations fail?” and concludes, about America, with a smirk, “So now they work for us.”

Schumer and Sens. Olympia Snowe (R-Maine), Lindsey Graham (R-S.C.) and Sherrod Brown (D-Ohio) made headlines for introducing a variation on legislation they have long advocated to punish China for protecting its manufacturers behind a currency wall created by undervaluing the renminbi.

The ever-crafty Schumer gets the problem even though his approach — escalating to a currency war and flirting with trade war — is dead wrong. Unfortunately, Republicans have been slow to develop a legitimate game plan, just as they have been slow to understand that the solution to America’s economic woes cannot be achieved with fiscal policy — tax and spending — reforms alone.

Equally if not more critical is fundamental reform of America’s monetary structure, which has been mishandled with almost criminal negligence by our elected officials since President Richard Nixon infamously closed the gold window in August 1971.