Dr. Janet Yellen now has taken over the chair of the Fed. And President Obama, to great acclaim, recently nominated Prof. Stanley Fischeras Vice Chairman. Prof. Fischer may be the most distinguished and beloved central banker at work within the world financial system today.
It is not often that central bankers find themselves beloved. Fed Chairman William McChesney Martin famously quoted a writer saying that the Federal Reserve is “in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.” Yet Fischer is beloved.
In 1999 Dr. Fischer was interviewed by Arthur J. Rolnick, then Senior Vice President and Director of Research of the Federal Reserve Bank of Minnesota. The Fed, at that moment, was riding high. When asked about the gold standard, Dr. Fischer’s answer concluded that “It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now.”
One hopes he would answer differently today.
"ROLNICK: Why don’t we just go back to the gold standard? Some would argue that world economies were more stable under the gold standard. Comments?
"FISCHER: It’s hard to quarrel with nostalgia for what the 19th century must have been like. But there is no good reason to tie the growth of the world’s money supply, and global inflation, to the vagaries of gold production. Nor is there good reason to waste real resources to produce gold for use as money. And there is reason to think we can do better than the gold standard: The United States has certainly done so recently, and the development of the inflation targeting approach to monetary policy suggests most countries will do so in future too. It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now."