COLUMN: Searching for economic leadership

I must admit that on last Tuesday evening I witnessed the finest reading of a speech from a teleprompter that I have ever heard. Unfortunately, to me, it rang hollow with no substantive ideas as to how the current economic morass can be solved.

If you look back at the stability this nation once had with its currency through the period 1800 until 1960 and then at the extraordinary depreciation of the dollar over the last 50 plus years you will see that the economic policies of each administration during this latter period have been utter failures. The basic solution was to print more money.

In my opinion the abdication of monetary control to the policies of the Federal Reserve and its attempts to manipulate the flow of money is the root cause of our current position. Increasing the national debt and running the money presses at top speed is not the answer. Look at the Consumer Price Index for the period 1960 to present — it is roughly a seven-fold increase (devaluation of the dollar) as shown by the Bureau of Labor Statistics.

So when will the smoke and mirrors game end? Not until, again in my opinion, we examine the past. Where do we start? One person that I can mention who understood situations such as our current one was Dr. Hjalmar Horace Greeley Schacht of Germany. Dr. Schacht (1877-1970) was an economist, banker, liberal politician, and the primary driver of Germany’s policy of redevelopment, reindustrialization and, yes, rearmament after the signing of the Treaty of Versailles at the end of World War I.

That treaty, as now acknowledged by most historians, was a mistake in its attempt to destroy the German nation through reparations and other means. Dr. Schacht ended up in a German concentration camp at the end of World War II and was later exonerated of all charges as a war criminal at the Nuremberg trials.

Schacht, as a member of the finance ministry (1923) developed a monetary program that ended the rampant inflation in Germany and stabilized the currency. He was twice president of the Reichsbank and also Minister of Economics (1934-1937). He was dismissed from his post when he opposed the rearmament expenditure proposed prior to the outbreak of WW II.

One of the axioms of Schacht bears consideration by our leaders at this time, I quote: “It has been shown that, in contrast to everything which classical national economy has taught, not the producer but the consumer is the ruling factor in economic life.”

One of the programs developed by Schacht was the development of bartering agreements by which Germany received raw materials in exchange for German products. This enabled German industry to turn out consumer goods and stabilized its own currency at the same time. He was a nationalist and a believer in conservative capitalism.

In the period 1935-1936 he urged the government to reduce military spending and turn away from autarkic and protectionist policies and reduce government control of the economy. He was forced out of the government in 1937.

There is much to be learned from the ideas of Dr. Schacht. I hope that our leaders might review them.

VERITAS.

Bayne’s column runs every Sunday. He is an author and historian. He lives in Culpeper. Email: walking.h.farm@hughes.net