.
In March 1929, the Harding-Coolidge
era came to an end. The eight years had witnessed the
greatest peacetime prosperity of any nation in history:
America in the Roaring Twenties. Early that March,
Calvin Coolidge handed the presidency over to
Herbert Hoover, who had just pulled off a third
straight Republican landslide.
"I do not choose to run," said Coolidge, who
could easily have won a second full term. Silent Cal
went home. Hoover, whom he privately derided as
"Wonder Boy," presided over the Crash of `29 and
the first three years of the Great Depression.
History holds Harding, Coolidge and
Hoover responsible for the Depression, with Treasury
Secretary Andrew Mellon, and Reed Smoot and Willis
Hawley of
Smoot-Hawley fame, as accessories.
As Voltaire observed, history is a
pack of lies agreed upon. Two men debunked the myth that
the low-tax, high-tariff policy of the 1920s brought on
the Depression. The more famous is
Milton Friedman, who proved to the satisfaction of a
Nobel Prize committee that the Depression was a
monetary phenomenon. The
Fed had opened the sluices, and the money had
swamped the stock market.
When
Wall Street crashed, there came a run on the banks
by men who had bought on margin, a depositors` stampede,
a bank collapse, a wipeout of uninsured savings and the
loss of a third of the money supply, lifeblood of the
economy. The Fed never gave the nation the needed
transfusions. Hoover and FDR, misdiagnosing the crisis,
raised taxes and wrote up new regulations, which was
like putting a body cast on a patient in shock from the
loss of a third of his blood
The Smoot-Hawley myth, repeated by
John McCain in the Detroit debate, was demolished by
Alfred Eckes of Ohio University,
Reagan`s man at the
FTC and America`s foremost authority on the history
of
trade and tariffs, in his 1995 Opening America`s Markets
The point of this brief history: The
recent hand-off from
Alan Greenspan, the maestro of the Global Economy,
to Fed Chairman
Ben Bernanke may turn out to have been a lateral far
behind the line of scrimmage, leaving Bernanke holding
the bag for a recession for which he is no more
responsible than was the hapless Hoover.
Last week, the stock market saw 4
percent of its value wiped out. Oil reached nearly $100
a barrel. The dollar fell to record lows against the
Canadian dollar and the euro. The
price of gold was $850 an ounce, signaling inflation
and a worldwide lack of confidence in the Fed`s ability
or determination to defend the
world`s reserve currency.
The Chinese, with $1.4 trillion in
reserves, perhaps 80 percent in dollar assets,
indicated they may dump dollars and move into euros.
Merrill-Lynch took an $8 billion hit. Citibank is
signaling massive losses from its subprime mortgage
debt. General Motors reported an operating loss of $1.6
billion for the quarter and a whopping $39 billion
charge that is among the biggest profit hits ever
reported
Where does this leave Bernanke? On
the horns of a dilemma.
Exposure of all that
subprime debt going rotten on the books of our
biggest banks, the staggering losses being reported, the
inability of
homeowners to refinance or borrow any further
against their equity, the credit crunch—all argue for an
easy money policy to get capital back into the economic
bloodstream.
Thus the Fed has cut interest rates
from 5.25 percent to 4.5 percent, thus the howls for
deeper cuts, thus the market anticipation of another
cut, though the Fed has said no more.
But the Fed is responsible not only
for the national economy. It is responsible for
defending the dollar, which represents the real savings
and wealth of the nation. And that dollar has lost more
value in seven years than in any similar period in
modern history. A euro, worth 83 cents the year Bush was
elected, has risen in value to $1.47.
As the dollar sinks, exporters may
cheer rising sales, but at home we will soon find that
the prices of all those imported goods from Europe and
Asia down at the mall are starting to rise. U.S.
soldiers, diplomats, tourists and businessmen overseas
are already feeling the pain of a falling dollar.
If a recession is generally a sign
the Fed should loosen up, a run on the dollar is a sign
the Fed should tighten by raising interest rates to make
dollars and dollar-denominated assets more attractive.
But the Fed`s raising of interest
rates would push up the rates on mortgages, credit cards
and auto loans, and push millions of marginal folks into
bankruptcy and the country into recession, a disaster
for the Republicans.
But, given their free-trade
fanaticism and free-spending ways, that fate would not
be undeserved. Say a prayer for Ben Bernanke. He may
have to eat the football that scrambling quarterback
Greenspan tossed to him far behind the line of
scrimmage.
COPYRIGHT
CREATORS SYNDICATE, INC.
Patrick J. Buchanan needs
no introduction to VDARE.COM
readers; his book
State of Emergency: The Third World Invasion and
Conquest of America,
can be ordered from
Amazon.com.
