Chris Mayer

In the wake of the 29th annual economic symposium hosted by the Federal Reserve Bank of Kansas City, Chris Mayer laments the passing of the Jacksonians and their attitudes towards banking.

THE 29TH ANNUAL economic symposium hosted by the Federal Reserve Bank of Kansas City began Thursday night in Jackson Hole, Wyo. This is a highly exclusive group of people; entrance is by invitation only. There are only about 100 attendees. I like to call it a Gathering of the World’s Most Dangerous Economic Minds.

Surely, you know the type: Greenspan and his rumored successors (Ben Bernanke, chairman of President Bush’s Council of Economic Advisers; Glenn Hubbard, dean of Columbia University’s business school; Martin Feldstein, president of the National Bureau of Economic Research); Jean Claude Trichet, president of the European Central Bank; Mervyn King, governor of the Bank of England; as well as a host of other Fed officials, central bankers, government economists, university researchers, and other assorted troublemakers.

It takes place in a small lodge nestled in Grand Teton National Park, in a low-lying valley surrounded by majestic mountains. (Hence the name Jackson Hole — to the rugged mountain men who explored that country, a “hole” was any low-lying valley surrounded by mountains. Rivers and streams often flowed into these holes, which provided good habitats for beavers. Hence, holes were good for trappers, who often named them after the men who worked them. Originally it was called Jackson’s Hole, but the possessive was eventually dropped, probably by some humorless local official.)

You won’t find a collection of more self-important world-improvers in one room. What comes out of it is bound to be a lot of barely intelligible papers, crackpot theories for steering economic policy, and wonderful words in honor of their chief oracle, Mr. Greenspan.

Yes, him. The topic of the symposium is “The Greenspan Era: Lessons for the Future.” And he will undoubtedly be hailed as a brilliant steward of his august and celebrated institution, feted with praise, and revered as a model for future economic button- and lever-pullers. When you have finished retching, you may read on.

There are times when I feel like I am in the wrong century, and this is one of those times. The chief lesson I take from the Greenspan era is this: When Greenspan leaves his position as chairman, let’s not appoint a new one.

The Jacksonians: Whatever Happened to James K. Polk?

Where, oh where are the fiery old Jacksonians when you need them, the likes of President Andrew Jackson himself, future President James Polk of Tennessee, Sen. Thomas “Old Bullion” Benton of Missouri, Amos Kendall of Kentucky, and Condy Raguet of Philadelphia? Have they no modern followers? Will no one speak for these ghosts whose faded thoughts lie fallow in the dusty tomes of history?

These men formed the heart of the Jacksonian movement, a group forged out of the bitter experiences of the Panic of 1819, dedicated to hard money, the elimination of fractional reserve banking, and the abolishment of the central bank.

The late great Murray Rothbard did much in his books and other writings to refurbish their tarnished image. Orthodox historians had smeared them as ignorant country bumpkins, dangerous rabble-rousers, and reckless swashbucklers, unfairly pinning blame on Jacksonians for subsequent panics.

Rothbard, however, corrected these perceptions. The Jacksonians favored free markets and opposed special monopoly privileges granted by government. And when they came to power, they succeeded in following through on much of their minimal-government economic platform.

The Jacksonians slashed tariffs and paid off the federal debt. Yes, paid off — for what would turn out to be the last time in U.S. history. They also succeeded in bringing down the central bank of the United States.

Their logic was simple and powerful. The Jacksonians saw the boom-bust cycles as products of an inflationary expansion of money and credit. Therefore, eliminate the central bank, since it is the primary culprit of this inflation. (There is far more to the Jacksonians than I can cover here. Those interested are encouraged to read Rothbard’s excellent book A History of Money and Banking in the United States .

The Jacksonians: Jacque Rueff 

Every once in a while, a prominent personality will take the position that there is something seriously amiss with our currency system. Even then, these people are largely ignored and their ideas are rarely taken seriously. Still, they become somewhat lonely heroic figures for those of us who still cling to the cause.

One of my favorites is Jacques Rueff, former minister of finance to Charles de Gaulle. He was almost poetic in his criticisms, made during the 1960s and 1970s, of the flawed monetary system of the dollar standard. “Piling up dollars cannot help but make people allergic to them,” he wrote. He saw that a dollar standard allowed, in his famous phrase, a “deficit without tears.” Rueff predicted further depreciation in the dollar, growing deficits, and recession — all which came to pass. His book The Monetary Sin of the West is still an entertaining and informative read.

Today, there are no Jacksonians and Rueffs among the power elite. Critics exist at the fringes. The mainstream opinion is one that favors central banking and central bankers — and the old gold standard is a quaint notion. Yet in the early 20th century, gold was still seen as the best way to restrict inflation. Allan Meltzer tells us in his A History of the Federal Reserve , “The gold standard was an issue in several presidential elections in the United States. Each time, the gold standard candidate won.”

Today, we do not see so clearly.

All national currencies have suffered tremendous declines in purchasing power since the imposition of central banking, but this has not deterred its proponents from seeing such institutions as defenders of their currencies.

Despite reeling from one monetary crisis to the next, one bubble to the next, there is still this belief that state-managed money is the way to go.

Despite ever-mounting governmental debts that have increased without interruption since 1956, people somehow cling to the notion of fiscal restraint and prudence in government spending (“If we only had the right people in charge, or the right laws in place,” they say).

In the Jackson Hole symposium, we have the very epitome of those dreamy thoughts. They are our Don Quixotes, our Platos. The differences between a Greenspan or a Hubbard or a Bernanke are superficial differences only. In the end, the symposium is a celebration of the same idea — the triumph of the idea of central banking.

Chris Mayer
August 20, 2005


Chris Mayer

Chris Mayer is managing editor of the Capital and Crisis and Mayer's Special Situations newsletters. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. In April 2012, Chris released his newest book World Right Side Up: Investing Across Six Continents

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