David Frum has written an article for CNN, “Ron Paul’s money plan is far from golden.” It is an attack on anything resembling a gold coin standard. It is therefore a defense of central banking in general and the Federal Reserve System in particular.
Who is David Frum? He is a Canadian immigrant who studied history at Yale and earned a law degree at the Harvard Law School. He has always earned a living as a journalist. He has long been employed by the neoconservative movement. He became a U.S. citizen in 2007.
In 2001, he got a job at the White House as a speech writer. It was Frum who coined at least part of the phrase, “axis of evil,” which identified North Korea, Iraq, and Iran as the three most dangerous tyrannies of the decade. George W. Bush used the phrase in his State of the Union Address on January 29, 2002, his State of the Union Address after 9-11. That speech was part of his run-up for the Iraq War.
In his book, The Right Man: The Surprising Presidency of George W. Bush, Frum wrote that the head speech writer had given him the task of inserting a few words justifying a war on Iraq. He wrote “axis of hatred,” but the head speech writer changed this to “axis of evil.”
Frum’s wife immediately sent out an email bragging about her husband’s accomplishment, or at least two-thirds of the accomplishment: “axis of.” This story got picked up by the Toronto Sun on February 1 — not surprising, since her father was the editor.
The story spread. On February 27, Frum handed in his resignation. The rumor mill blamed Bush’s anger at having had the most widely quoted phrase in his speech being attributed to a speech writer, as if anyone would have imagined otherwise, given Mr. Bush’s skills of verbal communication. Frum later said that he had already given the White House a month’s notice, meaning while he was still working on the speech. Whether he expected anyone to believe this story was a matter between him and his psychiatrist, which I assume he must have had, if he actually expected anyone to believe this story.
My point here is simple: Frum is a journalist who was briefly a speech writer for President Bush. For over two decades, he has bounced around inside the neoconservative movement. At present, he works for the American Enterprise Institute, which has a lot of money and has lots of Ph.D.-holding economists on the payroll. He has not written a book on economics, let alone monetary theory or policy. His books are on politics.
Then why did CNN, which is hardly a neoconservative media outlet, publish his hatchet piece on Ron Paul? Because he is one of its regular columnists.
Let’s see: a conservative (it says here) who is a regular columnist for Ted Turner’s creation. Isn’t bipartisanship grand?
HATCHET JOB #1
Frum has been swinging his hatchet against Ron Paul ever since he worked for Rudy Giuliani’s campaign for the presidency. According to Wikipedia, he became a U.S. citizen on September 11, 2007. He joined Giuliani’s presidential campaign staff on October 11, as a senior foreign policy advisor.
On November 7, he wrote his first hatchet job on Ron Paul’s economics.
His real motive was politics. He had a truly unique grasp of politics back in 2007 — the product of Yale, Harvard Law School, and two decades of close observation of American politics. He began:
Yesterday, I posted an item casting doubts on the significance of Ron Paul’s one-day $4 million fundraising haul. I suggested that his achievement is comparable to Ralph Nader’s in 2000, and much less impressive than Howard Dean’s in 2004. I went on to suggest that the main effect of Ron Paul’s campaign, if continued to the end, would be to take votes from Hillary Clinton and thus help a Republican ticket headed by Rudy Giuliani.
Eleven weeks later, Giuliani dropped out of the race. He had entered seven primaries. The best he did was third place. He received no delegates. Ron Paul eventually received 35. He and his main supporter also gained a huge email list.
Frum did not have a clue regarding American politics, the Republican Party, or the utter hopelessness of Rudy Giuliani’s dead-on-arrival campaign.
Frum’s latest book is Comeback: Conservatism That Can Win Again. I find this amusing.
His understanding of economics was not as good in 2007 as his understanding of American politics.
The National Bureau of Economic Research is the arbiter of when American recessions begin and end. It has determined that the recession — the worst since 1937 — began in December 2007, three weeks after Frum wrote this:
As the dollar buys less abroad, Americans will be constrained to consume fewer foreign goods and services — and foreigners will be induced to buy more from Americans.
With luck, this process will occur without a recession. The pace of domestic economic activity will continue brisk, dollar-denominated incomes will remain stable or even rise, unemployment may even decline as exports accelerate. This is what happened in 1985-86, the last time we saw a big drop in the value of the dollar.
Again, he did not have a clue regarding what was about to happen to the economy.
Of course, that’s not the only way to balance accounts. There is another, the way Americans experienced in 1837, 1857, 1893, and 1930—33. In those years, the value of the dollar was fixed to gold. (One dollar = 1/20 of an ounce.) If something bad happened in the world or US economy, the dollar could not adjust. A recession was like a car accident without bumpers or crumple zones — the full pain was conveyed uncushioned to the riders in the cabin. Domestic asset values collapsed. Unemployment jumped overnight to 15% or 20%. Homes were lost, businesses disappeared.
But wait! This is what has happened in the years since Frum wrote his article. It began three weeks after he wrote it.
In 1896, ironically, the gold standard got lucky. Bryan lost, McKinley won. Almost immediately after McKinley’s elections, gold miners first in South Africa and then in Australia found huge new goldfields. America got the inflation it needed without silver, thanks to a geological accident. From 1896 to 1913, the world economy expanded in what is known to history as “La Belle Epoque.”
In fact, the period 1867 to 1897 was one of remarkable economic growth — the greatest in American history. This is made clear in the book by Milton Friedman and Anna J. Schwartz, A Monetary History of the United States. Wages fell slightly, prices fell steadily at a more rapid rate than wages, and output quadrupled. Per capita income doubled.
As for Ron Paul, Frum dismissed him as a Michael Moore type.
Of course I am saddened to discover that many thousands of Americans have rallied to a candidate campaigning on a Michael Moore view of the world.
Saddened, but not greatly surprised. There is a constituency for anything in a country this big.
In short, David Frum did not have a clue.
Has he learned anything since 2007? This brings me to his recent hatchet job.
HATCHET JOB #2
Frum began by noting Paul’s overwhelming victory at CPAC: the Conservative Political Action Conference. Paul got 31% of the straw votes for President. Mitt Romney, who had won for three years in a row, got 22%. From the point of view of a neocon, this was bad news indeed.
CPAC’s organizers cautioned against over-interpreting the Paul win. Participation in the poll had been light, the Paul team had just out-organized, etc. All true enough.
Ron Paul had once again caught Beltway conservatives by surprise. All they could do was spin their way around this. With the Web, this no longer works.