Have you ever wondered where dogs get their names? How about a Dalmatian named spot? Better yet, if I say the name 'snoopy' are you more inclined to think Doberman or Beagle? Economists, like dogs, are often identified with particular movements or if you like, breeds.
In a classic or neo classical sense/timeframe, things were relatively simple. By and large, there were two 'schools' of economic thought. The school a particular economist was identified with generally provided an informed or learned individual a descriptive of the type of policies or beliefs they espoused or stood for. Back in the1700's it was the British school of economics that predominated in the English speaking world. Adam Smith' Wealth of Nations has been viewed by some as the place where 'it' all started - it being economics of course. This explains where the term classical or British school came from. From the invisible hands of Smith to Malthus, the headliners of the British school had an innate distrust of government and never welcomed government meddling in the natural course of business. They were also advocates of sound money. As a bunch, they felt that government intervention made things worse.
Around the same time period the Austrian school was just beginning to take shape. Cantillon and Turgot got the ball rolling so to speak but it was not until Carl Menger's Principles of Economics, in 1871 that the Austrian school gained traction. It took its name, in no small part, from the fact that Menger was professor of economics at the University of Vienna. Then, not until works by Boehm-Bawerk did this movement gain a substantial audience in the English speaking part of the world. This movement was based in academia and centered around observations of economic laws or forces that operated in as much a predictable fashion as natural laws. They were champions of the gold standard and they are widely credited for 'discovering' and explaining the laws of supply and demand and identifying the cause of inflation. As the Austrian school continued to evolve, economists like Say, von Mises, von Hayek and eventually in modern times Rothbard continued to carry the torch.
Until the early 1900's it was largely these two 'schools' punching it out on the global economic stage trying to win the minds of mortal men. The rise of upstart Marxism which gave way to the Bolshevik revolution was a thorn in the side of the more established schools. Socialism had more than its fair share of unsavory characters. Many of them were likely painted as bigger 'monsters' than they merited by pop culture that was polarized during the big red scare and throughout the 'cold war'. Socialism permits no private property or exchange in capital goods, and thus no way for resources to find their most highly valued use. It was von Mises that first predicted that if the world fell to socialism that chaos would ensue and civilization would be lost.
Until just after 1900 there were really only two competing schools of economic thought, namely the British and Austrian schools - both steeped in or at least exhibiting principles in the broadest sense of classical economic thought. In a political sense this was somewhat akin to a two party universe like say, republicans and democrats. These were two very similar parties with, one might argue, only ideological nuances separating them. Around the time of World War I, the Marxists and their Communist Manifesto arrived at the 'party'. Exactly why or how the Marxist movement gained traction is a point for debate but few would argue that the time period of its beginning was highlighted by czarist excess. It was around this time that the industrialization process really began to kick it up a few notches, probably in large part due to productivity gains brought on with the internal combustion engine supplanting steam. The result was vast new pools of wealth being created. This 'new' wealth practically meant 'the cake got bigger'. Isn't it amazing how bigger cakes generally create quandaries and the age old problem with regard to exactly who gets more? The political equivalent of the Marxists emergence to the status quo is somewhat like the ruffian Ralph Nader showing up uninvited to a John Kerry dinner party and wanting to 'eat cake'. For the first time, in other words, there were now truly competing views from an ideological standpoint. The newcomers were quickly 'branded' as unsavory by the establishment. They even invented a new name that would come to symbolize meanness for that cake eating dog - communist. Somehow, it seems, Bolshevik just didn't seem scary or harsh enough. At or about 1920, there was now clearly a 'three dog race' in an ideological economic sense. Each was identifiable and most interested observers generally knew where each party stood on substantive issues.
At or about the same time the Marxist movement was taking hold another institution was secretly being framed up at a secret meeting at Jekyll Island, Georgia - namely, the stalwarts of the 'money trust' were laying the groundwork for what would become the Federal Reserve. Besides there being more cake, why a Federal Reserve/Central Bank and why now? After all, political thought at that time in America was decidedly against the usurious Central Bank system that was so invasive throughout Europe. The few elitists (widely known at the time as the money trust) behind the proposed Federal Reserve were all vastly wealthy but widely distrusted due to all too frequent bank failures. In one fell opportunistic swoop, they ensconced their legacies by gaining the authority (a large sales job was required) to create money in America. In the end, this arrangement was one of convenience that arose largely out of government's financial predicament (they were basically broke) and their requirement to fund the war effort (WWI). Even in those days, wars were not cheap affairs. I ask, are there parallels and does this sound familiar at all? The only 'leash', so to speak, on these new found powers was the requisite adherence to the discipline of the "gold standard". What most people today do not realize is that Federal Reserve is nothing more than a government sanctioned and protected private banking cartel. The name Federal Reserve was chosen because the word "Federal" deceptively sounded like government and the term "Reserve" implied safety - as in bank safety. "Central Bank" was not palatable to the public.
The twenties roared right up until 1929. A stock market crash brought on the 'dirty thirties' whose plight gave rise to a new enlightened economic movement spearheaded by John Maynard Keynes. Keynesian economics, as it became known, was characterized by a belief in active government and suspicion of market outcomes. This brand of economics saw its heyday in the thirty years following WWII and laid the groundwork for the inflationary times of the 1970's. It was this spiraling government spending (currency debasement) that ultimately caused the closing of the gold window through the abandonment of the Bretton Woods System by the Nixon administration. Excessive government spending (mostly deficit derived) had threatened to choke off or 'crowd out' business spending. In other words, government spending was booming while private enterprise was largely stagnating. I ask again, does this sound familiar to anyone?
The excesses of the 70's gave rise to the Monetarists. For the most part, the teachings and thought of Milton Friedman headlined this movement. As the leader of the Chicago school (he got his masters from the University of Chicago in 1933) of monetary economics, Friedman's work stressed the importance of the quantity of money as an instrument of government policy and as a determinant of business cycles and inflation. The monetarists ruled main stream economic thought throughout the 1980's and perhaps felt somewhat emboldened by the apparent collapse of communism with their much celebrated victory in the Cold War. After patting themselves on the back and nearly drowning in self adulation for collapsing the Berlin Wall, they soon got down to the serious business of spending the peace dividend (eating more cake). It probably never occurred to any of these bright thinkers the Chinese were communists and they too had a wall - a great one that could be seen from space.
So folks, that's a little bit of history about the movements, the players and how at different times they each lent their names to their cause. What I find troubling today is getting a handle on how the likes of Summers, Rubin, Greenspan et al will be remembered by future generations? Will their collective actions be remembered as a definitive movement with easy Al Greenspan as their front man? Maybe they will be known as a group of guys who had their cake and ate it too? Perhaps they will be more notoriously known for Summers' ground breaking academic work on Lord Keynes' Gibson's Paradox. As undersecretary of the treasury for Robert Rubin, some profess that a sinister plan based on Summers' masterwork was instituted by the Clinton administration. The nuts and bolts of it being government spending was heavily ramped up debasing the currency while maintaining the illusion of a strong currency through covert gold sales effectively rigging the price of gold. Summers ground breaking work in this area theorized how such a plan was possible and could be implemented.
Over the past 5-10 years there is a growing body of evidence to suggest that the price of gold has indeed been rigged. We know categorically gold has been 'swapped' and sold by Central Banks of many western industrialized countries. Furthermore, there is an increasingly irrefutable body of evidence to suggest that major gold producers were or have been induced to sell forward years of production with 'sweetheart deals' under alleges of hedging. There are law suits pending in this regard even as this essay is being written (Blanchard vs. Barrick and J.P.Morgan Chase). Then there is the U.S. treasury and their claim to possess 8.125 thousand tones of sovereign gold. The only problem with this assertion, in light of the above circumstances, is that no one has seen this gold nor has it been independently audited since the late 1950's - a real head scratcher for sure.
In the end, it shall pass that even these dogs will receive names. The manner in which these names are recorded and what they ultimately stood for will one day be recorded if for nothing else, posterity sake. My question to you dear reader, will these celebrated individuals be remembered in a fond warm and fuzzy sense or a fraudulent fiat folly sense? Bark three times if you really know the answer.
