You come to us nd te us tht the get cities e in vo o the godstndd. ... I they de to come out in the oen ed nd deend thegod stndd s good thing, we sh ght them to the uttemost.Hving behind us the oducing msses o this ntion nd the wod,suoted by the commeci inteests, the boing inteests, nd thetoies eveywhee, we wi nswe thei demnd o god stnddby sying to them, you sh not ess down uon the bow o bothis cown o thons. You sh not cuciy mnind uon coss ogod.– Wiim Jennings Byn, Democtic Ntion Convention, 1896I m condent tht the Fed woud te whteve mens necessyto event signicnt deftion in the United Sttes, nd, moeove,tht the US cent bn, in cooetion with othe ts o thegovenment s needed, hs sucient oicy instuments to ensuetht ny deftion tht might occu woud be both mid nd bie. …[U]nde t (tht is, e) money system, govenment (in ctice,the cent bn in cooetion with othe gencies) shoud wys bebe to genete incesed nomin sending nd inftion, even whenthe shot-tem nomin inteest te is zeo. … [T]he US govenmenths technoogy, ced inting ess (o tody, its eectonicequivent), tht ows it to oduce s mny US dos s it wishest essentiy no cost.– Ben S. Benne, Ntion Economists Cub, 2002
The debate over the gold standard had raged or nearly twenty years when William JenningsBryan electried the Democratic National Convention o 1896 to capture his party’s nominationor president. Businessmen and bankers avored the gold standard as responsible monetary policy.But the gold standard had kept money tight during a period o rapid expansion in the productivecapacity o the country, which led to declining prices and a series o deationary booms and busts.The Panic o 1893 and the subsequent depression o 1893 – 1897 was an especially severe period.Falling crop prices combined with a rapid increase in arm loans let many armers in desperatestraits, while the working classes had endured alling wages and terrible unemployment; hencearmers and workers wanted looser money. Populist rage inamed the politics o ination anddeation
.Ben Bernanke’s speech was made in a very dierent historical context and to a very dierentaudience. The preceding twenty years rom 1982 – 2001 had been a golden age o central banking,started by the deeat o the Great Ination o the 1970s. The prestige o central banks dependedupon the condence that a “Goldilocks” regime o mild ination (perhaps 2% per year) could bemaintained indenitely with only brie, small deviations. At the time o his speech, there weregathering worries that the United States might enter a deationary period similar to the one Japanhad then endured or over a decade. Yet the issue was still too remote to penetrate the body politicbroadly; Bernanke’s immediate audience was his economist peers, and even his broader audiencewas limited to the business and nancial elite. The message was condent: deation would probablybe prevented, but i it was not, the central bank could quickly return the economy to Goldilocks.The speech helped convince the political class that Bernanke had the expertise to lead the FederalReserve.
Naturally there were political nuances; for example, silver mining interests favored bimetallism(which would lead to looser money) primarily because it would increase the demand for silver.See
A Monetary History of the United States
, 1857 – 1960, Milton Friedman and Anna JacobsonSchwartz, and
Democracy in Desperation, the Depression of 1893
, Douglas Steeples and DavidO. Whitten.
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