Lewis E. Lehrman: “House Budget Resolution Fails to Reform the Federal Reserve System”

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The Wall Street Journal published an important editorial feature by The Gold Standard Now's founder and Chairman, Lewis E. Lehrman, in its April 26th national edition. Mr. Lehrman has re-emerged in the national spotlight with his March 17th testimony before the House Subcommittee on Domestic Monetary Policy.

[Bernanke] avoids or he doesn’t understand the very subtle mechanisms by which Federal Reserve credit policy does ignite the price level abroad by raising the value of foreign currency.

The Wall Street Journal published an important editorial feature by The Gold Standard Now's founder and Chairman, Lewis E. Lehrman, in its April 26th national edition. Mr. Lehrman has re-emerged in the national spotlight with his March 17th testimony before the House Subcommittee on Domestic Monetary Policy.

In The Wall Street Journal column Lehrman states:

“What persistent debtor could resist permanent credit financing? For a government, an individual or an enterprise, "a deficit without tears" leads to the corrupt euphoria of limitless spending. For example, with new credit, the Fed will have bought $600 billion of U.S. Treasurys between November 2010 and June 2011, a rate of purchase that approximates the annualized budget deficit. Commodity, equity and emerging-market inflation are only a few of the volatile consequences of this Fed credit policy.

"The solution to the problem is equally simple. First, in order to limit Fed discretion, the dollar must be made convertible to a weight unit of gold by congressional statute—at a price that preserves the level of nominal wages in order to avoid the threat of deflation. Second, the government must at the same time be prohibited from financing its deficit at the Fed or in the banks—both at home or abroad. Third, only in the free market for true savings—undisguised by inflationary new Federal Reserve money and banking system credit—will interest rates signal to voters the consequences of growing federal government deficits.”

Lerhman’s op-ed brought immediate worldwide notice. William Kristol, founder and editor of the political magazine The Weekly Standard stated that “…Lew Lehrman explains the connection between monetary and fiscal policy—fiscal policy will almost inevitably tend toward deficits and debt if the monetary authorities are (virtually) unconstrained in financing that debt.”

Other prominent commentary stemming from this op-ed include the FrumForum, where the columnist astutely highlighted Lehrman’s key anti-deflationary axiom: “the dollar must be made convertible to a weight unit of gold by congressional statute—at a price that preserves the level of nominal wages in order to avoid the threat of deflation.”

On Wednesday, April 27th Lawrence Kudlow (CNBC's Kudlow Report) stated to Lehrman, “You have written so brilliantly about the need to re-link the dollar the gold—in fact to make the dollar convertible into gold. Mr. Bernanke doesn’t get that.” To which Mr. Lehrman replied, “He does not get that. He avoids or he doesn’t understand the very subtle mechanisms by which Federal Reserve credit policy does ignite the price level abroad by raising the value of foreign currency.”

Hundreds of international newspapers, magazines, and online venues took note of Lehrman’s call for monetary reform as essential element to creating the conditions for federal spending restraint, including Forbes.com, Atlas Economic Research Institute’s Sound Money Project, India Times, GATA.org, Fuse.tv, and The Supply Side Blog.

Lehrman is scheduled to appear on the Fox Business’s Lou Dobbs Tonight—Thursday, April 28, at the 7 PM hour.

About The Lehrman Institute
The Lehrman Institute is dedicated to public policy, educational and historical research. It was founded in 1972 by Lewis E. Lehrman. The Lehrman Institute has sponsored a wide range of research and discussion in the fields of economics, historical research, foreign policy, and urban policy. TheGoldStandardNow.org is a news and commentary aggregator focused on domestic and international monetary policy issues.

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Kathleen Packard
The Gold Standard Now
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