Business: Thoughts on Dr. Alan Blinder

A little while back Dr. Alan Blinder came to TCNJ to give a talk on the backlash experienced after policy was enacted to combat the financial crisis. Dr. Blinder is a professor at Princeton University, the vice chairman of the Promontory Interfinancial Network, served on President Clinton’s original Council of Economic Advisers and then as Vice Chairman of the Boards of Governors of the Federal Reserve System.

He spoke about why the backlash happened and what steps should be taken in the future to minimize the negative reaction of the public. As it turns out his advice on how to get people to support policy, or at least react better, seemed to be valid. For me, however, some of his statements were not compelling or convincing.

One such instance which exemplifies my discontent was when Dr. Blinder claimed that those who expressed dissatisfaction with money printing were not knowledgable. With a laugh he said that this has been going on since 1914 but what he failed to mention was that the gold standard was still utilized until 1933 and was only completely severed in 1971. He seems to have grossly mischaracterized what the objections to money printing were and it needs to be acknowledged that limited and unlimited printing are completely different beasts.

I asked Dr. Blinder what his reaction was to the recent statement by his colleague Alan Greenspan regarding gold. Greenspan said in an interview “Gold is currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.” What is quite funny about this, beside the fact that this is what one of the biggest money printers in the world said, is that it was conveniently cut out of the live stream interview. Coincidence? I think not. But I digress.

Dr. Blinder answered with two reasons of why he thinks that Greenspan’s new found (or if we really look at Greenspan’s history, just below the surface, but always there) support of gold as the ultimate currency. First, he said the original reasoning behind the gold standard was to fix exchange rates between the US and France. Secondly, he claimed that fluctuations in the gold market (in terms of the amount that is being discovered at a given time) would have too much power over the value of the currency. While both of these points are valid and a good response to Greenspan’s comment, my true concern is the fact that our currency is backed by nothing but faith in the US government. That is a scary thought! In my ideal world our currency would be backed by something (not necessarily gold) that is substantial and finite. I do not do well with the idea of unlimited printing and where that can lead.

Are you familiar with the thoughts and policy of Dr. Blinder? What are your opinions on him and his work?