The Federal Reserve System was hemorrhaging gold, and entire state banking systems were shutting down one after another. If the economy was to survive and recover, FDR had first to staunch the bleeding, and then to arrange for a transfusion. Here I explain how he managed the first of these steps.
Before I can explain how, and to what extent, FDR’s gold policies contributed to the recovery, we must step back in time to consider the causes of the banking crisis, including the part gold played in it.
“If you put the federal government in charge of the Sahara Desert,” the economist Milton Friedman once quipped, “in five years there’d be a shortage of sand.” The U.S. Mint, to its credit, had a much longer run.
Cato’s Annual Monetary Conference last November hosted a “shadow review” of the Federal Reserve’s own self‐review, dedicated to examining “whether the U.S. monetary policy framework can be improved to meet future challenges.” The articles in the spring/summer 2020 issue of the Cato Journal, drawn from that conference, are now available online.
A FedCoin retail payment system is likely to be less inefficient than a FedAccount system, because it does not require an ill‐equipped Federal Reserve System bureaucracy to provide as much retail customer service.