Tuesday, June 10, 2008

Bernanke Discovers the Dollar

The valiant New York Sun has printed my letter in its June 10th edition and online here:

'Bernanke Discovers the Dollar'

Thank you for your editorial about the Fed's role in creating inflation ["Bernanke Discovers the Dollar," June 5, 2008].

In the late 19th century the Mugwumps, the educated New Yorkers and Bostonians who opposed the spoils system and big government, were concerned about currency depreciation and inflation that Civil War greenbacks had caused.

In particular, the Mugwumps were concerned that inflation led to the re-distribution of wealth from wage earners and those on fixed incomes to financial speculators like Jay Gould.

Ever since President Nixon jettisoned the international gold standard in 1971, Americans' average real hourly wage has declined. There has been no previous 38-year decline in the real hourly wage.

Modern economists, lacking the Mugwumps' courage, have averted their gaze from link between income inequality and monetary expansion.

But the link is obvious, and it is becoming more severe. In 1884 the Mugwumps bolted the Republican Party to vote for a Democrat, Grover Cleveland, a gold standard proponent.

Let us hope that John McCain offers greater integrity than did Cleveland's 1884 opponent, James Blaine.

Associate Professor of Business and Economics
Brooklyn College
Brooklyn, N.Y.

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