Nightcap

  1. The future of God in 1943 Tim Stanley, History Today
  2. Against the old clichés, Anne Applebaum, New Criterion
  3. French colonialism lives on in Africa Thomas Fazi, spiked
  4. A free-market gold standard? George Selgin, Alt-M

Nightcap

  1. How the Arabic language spread Barnaby Rogerson, History Today
  2. Post-Ottoman ethnic cleansing Christopher Kinley, Origins
  3. Legal decentralization and the Ottoman Empire NOL
  4. Fear of a gold planet Larry White, Alt-M

Nightcap

  1. The case for empathy Elizabeth Segal, Aeon
  2. Christianity: an internationalist perspective Ross Douthat, New York Times
  3. Who’ll defend freedom? Chris Dillow, Stumbling & Mumbling
  4. Judy Shelton speaks up for the gold standard David Glasner, Uneasy Money

Nightcap

  1. Good riddance to cultural Christianity James Rogers, Law & Liberty
  2. When failure succeeds Chris Dillow, Stumbling & Mumbling
  3. Interest rates and the gold standard Larry White, Alt-M
  4. Trump’s America, Netanyahu’s Israel Adam Shatz, London Review of Books

Joakim Book: Winner of the 2018 Money Metals Exchange & Sound Money Defense League essay contest

Just to keep readers up to date, Joakim just won a scholarship for an essay on sound money and banking. Here is the link to the essay. Here is the link to the announcement. It reads as follows:

For the third straight year, Money Metals Exchange, a national precious metals dealer recently ranked “Best in the USA,” has teamed up with the Sound Money Defense League to offer the first gold-backed scholarship of the modern era. These groups have set aside 100 ounces of physical gold to reward outstanding students who display a thorough understanding of the economics, monetary policy, and sound money.

A gold-backed scholarship?! Freakin’ awesome. Here is Joakim’s latest post at NOL, which was highlighted at the Financial Times‘ “Alphaville” blog (the FT is like the Wall Street Journal for countries that were once part of the British Empire).

One of the things I liked most about Joakim’s latest blog was the fact that he incorporated a post by another Notewriter into his thoughts (in this case Rick’s musings on Mariana Mazzucato and counterfactuals). The folks at “Alphaville” have been good to us over the years, too. They’ve linked, since 2017, to thoughts from Shree, Federico, Vincent (twice!), Mark, and Tridivesh as well as Joakim.

Joakim’s well-deserved award stacks up quite nicely with Lucas’ 2018 Novak Award from the Acton Institute and Nick’s winning entry for the Mont Pelerin Society’s 2018 Hayek essay competition. All in all, it’s been a good year for the Notewriters.

Josh Barro and the Gold Standard

A few days ago, when it was announced that former Cato Institute president John Allison was under consideration for treasury secretary, Josh Barro of Business Insider dismissed the man as a “nutcase”. Why? Because Allison believes that the Federal Deposit Insurance Corporation (FDIC) generates a moral hazard that contributes to financial crises (a statement I agree with).

This slur irked one of the economists at Cato, George Selgin, who took to twitter to challenge Barro. In the exchange, at one point, Barro indicated that the desire of libertarians to return to the gold standard confirms the “nuttiness” of libertarians and the people at Cato.

And here, Barro allows me to make a comment on the gold standard. The sympathy towards the gold standard is not sympathy towards gold per se, but rather sympathy for reducing the capacity of governments to exercise discretion. Basically, each time you hear some academic economist mention the gold standard, what that economist means is rules-based monetary policy.

The gold standard era (1875-1914) was not an image of perfect monetary policy. It is not a lost paradise that we ought to strive to. However, the implicit rules imposed by the system did favor more stability that would have been the case with discretion during that era. In fact, the era of central banking with the Federal Reserve has not been that great relative to the gold standard era (and in the world of central banks, the Fed is pretty good). A lot of the scorn that the gold standard era has received had to do with regulatory policy towards banks (notably regarding restrictions on branch banking which forced more volatility) or with the role of changes in international demand for assets (see here). Thus, in spite of its many flaws, the gold standard was not that bad (but it was not* gold per se that was helpful – it was the shunning of discretion by governments).

To be sure, I do not favor a return to a gold standard era. What I do like, and what I think John Allison likes as well, is the return to rules-based monetary policy. Josh Barro should have been intellectually generous and understand this key distinction. By not making that distinction, of which he must be aware given his background, he debased the debate over monetary policy.

The Gold Standard is Not Without its Costs

News from the department of “life is bigger than art:” A few days ago I posted a fictitious account of a future Wells Fargo Bank operating on a revived gold standard. Turns out the real Wells Fargo, now a regular large commercial bank with its roots in the California gold rush, has a branch in downtown San Francisco at the site where the bank was first opened in 1852. The branch had an exhibit of historic artifacts, including gold nuggets from the gold rush era. I say had, because last night thieves rammed an SUV into the lobby and made off with the nuggets!

All of which underscores the fact that security is among the real costs associated with a gold standard. There is no law of nature that says free banking has to be based on gold, as I pointed out in my post. The market would, if free to do so, sort out costs and benefits and find the sort of system or systems that best satisfies consumers.

I love Wells Fargo; They Hate Me.

While I have this blog window open I’ll add some unrelated comments about Wells Fargo. I am a happy customer and I credit this to the stiff competition among banks at the retail level. I regularly get solicitations from banks offering $100 bonus to open an account, with strings attached, of course but I stick with Wells Fargo. At the macro level our current banking system is gravely flawed but it works well for us retail customers.

I get free checking, a handy web site, and ATMs all over the place. When my credit card was hacked recently, they replaced it promptly and took my claims about false charges at face value. My average credit card balance last year was nearly $4,000 and I paid zero interest. That’s because I pay it off at the last possible date, which is 25 days after billing. I pay an $18 annual fee but got $300 in cash rebates last year. I never pay late fees or penalties of any kind.

I do not have a savings account with Wells Fargo because those accounts are a joke. Their most popular savings account yields (drum roll) 0.01%. Not one percent, but one hundredth of one percent. For every thousand dollars I might keep in a savings account, I would get ten cents in annual interest, taxable. I do, however, hold shares of Wells Fargo preferred stock which pay 6.8% current yield (for you experts, a somewhat lower yield to call). The shares appreciated about 70% since I bought them at the bottom of the Great Recession.

So I am a money loser for Wells Fargo. They earn merchant fees from my credit card use and that’s about it. They count on their average customer’s ignorance and lack of financial discipline to generate fee income and to carry high-interest balances on their credit cards. Dear reader, if that describes you, don’t despair. You can get out in front of the wave and let the banks work for you, not the other way around. It just takes a little knowledge and some discipline. Most important: if you can’t pay cash for a purchase (or use a credit card paid off before interest kicks in), you can’t afford it! That includes cars. Save up your money and buy a junker. Mortgages are OK for home purchases because of tax breaks, but even there, start with a healthy down payment.

Here endeth today’s sermon. Go in peace and freedom!