Yellen and DeGaulle
Editorial of The New York Sun
February 13, 2014
“Yellen Snubs emerging nation pleas” is the headline that catches our eye in the wake of the first testimony before Congress of the new chairman of the Federal Reserve. It was streamed across the top of the Financial Times.
The pleas Mrs. Yellen was snubbing were over “effects of ‘taper,’” meaning over the slowdown in the pace at which the Fed is pursuing its quantitative easing. The FT quotes India’s central bank governor, Raghuram Rajan, as saying the Americans are “washing their hands” of emerging markets.
This is a moment to remember Charles of Gaulle. In February 1965, at the height of his stature, the president of the French Fifth Republic held a famous press conference in the Elysee Palace. He gathered 1,000 journalists in a room and sat them in gilded chairs. He himself sat, we noted when we first wrote about this moment, at a cloth-covered table in front of the newspapermen and women and warned that the dollar had lost its transcendent value and called for a return to the gold standard.
The virtue of the gold standard, in the eyes of DeGaulle, was that the system was not particular to any one country but imposed the same measure of value and thus of discipline on all of them. Time (magazine) stood still in amazement: “Perhaps never before had a chief of state launched such an open assault on the monetary power of a friendly nation,” it said. Less than half a year later, President Lyndon Johnson signed the 1965 coinage act, beginning the formal debasement of American money.
Janet Yellen doesn’t want to talk about DeGaulle’s point. The political wise men and women fail to reference it (the FT itself often mocks the gold standard even though its editors front the very phenomenon that galled DeGaulle).
Chairman Bernanke didn’t want to talk about it. Congress is all too happy to delegate the power it was granted in the Constitution to regulate the value of our coin (and foreign coin). So the emerging nations are the losers, for now. When they finish emerging, though, watch out.
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