It’s something to think of a one-time member of the socialist Zionist Habonim youth movement acceding to the vice chairmanship of the United States Federal Reserve. The anti-Semites, of course, were already aflutter with the nomination of Janet Yellen to be the next chairman. One of them insists she’ll be the “fifth consecutive Zionist” to chair the central bank. Stanley Fischer, however, is the real thing. He joined Habonim as a youth in Zambia. Now he is tipped to succeed Yellen as vice chairman.
- America Wants Our 'Rock Star Banker' Stanley Fischer
- A Woman at the Bank of Israel Isn’t a Feminist Fable
- Obama Announces Janet Yellen as Nominee to Be Next Fed Chair
- When the Democrats Attacked the 'Christ-killing Shylocks of Wall Street'
- Stanley Fischer’s Personal Wealth Could Be $56m
Well, dream on, lads. When Yellen comes up for confirmation January 6 — and if Fischer is nominated as vice chairman — the senators will be prohibited from considering their religion. This is because of Article VI of the Constitution, which requires all officers of the federal and state governments to be bound by oath to support the federal Constitution but warns that “no religious Test shall ever be required as a Qualification to any Office or public Trust under the United States.”
No. Ever. Any. It’s the most emphatic sentence in the entire parchment. It is one reason, if only one, that a country otherwise as diverse as America could end up with six Catholics and three Jews on its nine-member Supreme Court. The real questions about the Fed have to do with monetary policy. Both Yellen and Fischer may be logical stewards of the current system. But neither represents the kind of break in policy for which many of us are looking.
This would be an end of the fiat dollar and a return to the concept of specie-backed money that obtained among the constitutional framers. The fiat era was launched in 1971 by President Nixon, who closed the gold window and ended the Bretton Woods system. Since October 1976, there has been no legal definition of the dollar in terms of gold or silver. Instead, the value of the dollar fluctuates with interest rates set by the economists who rule the Fed.
It is what journalist James Grant likes to call the Ph.D. standard. He harbors, as I do, personal admiration for Fischer, Yellen, Bernanke et al. But he famously distrusts their capacity— or that of any band of PhDs — to set monetary policy without reference to something sound. Mr. Bernanke’s tenure has seen the value of the dollar collapse to but a 1,200th of an ounce of gold. It has been gaining value in the past year but is still less than half what it was when he acceded to the Fed chair.
This collapse was one of the results of Bernanke’s policy of near zero interest rates. Fischer also ran a weak-shekel policy at the Bank of Israel. Fischer kept interest rates low, and the value of the shekel collapsed 62% on his watch, to about a 4,800th of an ounce of gold. Over the same span at the Fed, with Bernanke in the chair much of the time, the value of the dollar plunged 65%, to an 1,192nd of an ounce of gold.
Fischer was no more interested than Bernanke in legislation to move away from fiat money. Not that this was a surprise. Neither he nor Janet Yellen is likely to be so in respect of the dollar if they are elevated at the Fed. So the reformers will have their eye on the Congress, where several bills are percolating, if slowly, as the Federal Reserve commences its second century of operations. The centenary will occur in the year that Yellen takes office and Bernanke returns to private life.
The monetary reform effort in Congress is being nursed by some of the right-wing visionaries, like Senator Mike Lee of Utah and Rand Paul of Kentucky. Reforms are also being nudged by moderate Republicans, like the chairman of the Joint Economic Committee, Congressman Kevin Brady, or the chairman of the Budget Committee in the House, Paul Ryan. The betting around Capitol Hill is that these efforts will languish until the things take a turn for the worse.
When that will happen, I don’t know. I do know that the advocates of monetary reform started warning about trouble part way through President George W. Bush’s presidency, when it became clear the value of the dollar was collapsing as America pursued — as it had in Vietnam — both guns and butter. The Fed and the Congress ignored, or mocked, the gold price. The ensuing employment recession has left more than 7% of the work force out of work for the entire Obama presidency so far. What in the world would the young socialist idealists of Habonim have made of that?
When Justice Elena Kagan was up for confirmation, Senator Lindsey Graham of South Carolina evoked warm laughter when he asked her where she was on Christmas. “You know, like all Jews” she replied, “I was probably at a Chinese restaurant.”
Seth Lipsky is editor of The New York Sun. He was a foreign editor and a member of the editorial board of The Wall Street Journal, the founding editor of The Forward and its editor from 1990 to 2000. His books include “The Citizen’s Constitution: An Annotated Guide,” and most recently “The Rise of Abraham Cahan.”