BOOK REVIEW: The Monetary Conservative by Christopher S. Chivvis

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For fans of the late Jude Wanniski, along with other somewhat lonely advocates of a dollar defined in gold in modern times, the name Jacques Rueff is one that regularly comes up. One of the leading policy intellectuals in favor of a pure gold standard in the 20th century, Rueff's name looms large to this day among those who follow currency matters.

Rueff was a productive writer, L'Ordre Social was his magnum opus written in French, but for Americans eager to get their hands on his most famous work on currency matters - The Monetary Sin of the West - they would have to be both patient and willing to pay quite a lot of money on eBay or Amazon to get a copy. Thankfully, there's an alternative way to develop a better sense of Rueff's thinking, and it comes in the form of a biography of the great French economist by Johns Hopkins professor Christopher S. Chivvis.

His book, The Monetary Conservative, does a creditable job of telling the interested reader about a member of the policy elite who embraced now quaint notions of light taxation and regulation, governments that are parsimonious, free trade, and monetary systems that elevate currency stability above all else. Indeed, about inflation Rueff once observed that it "is the work of the devil, because it respects appearances without destroying anything but the realities."

Strong, very true words, and what we would give today for a Treasury secretary who might utter something similar. Alas, since 2001 we've suffered Treasury heads from both sides of the aisle that have regularly abused their perch as the dollar's mouthpiece to talk the greenback down on the way to skyrocketing commodities, reduced investment in the wage economy, financial crisis rooted in dollar-driven malinvestment, and recession. In short, we could use a Jacques Rueff in this country right now.

In Rueff's case he put monetary stability at the top of the pyramid when it came to maintaining democracy. As he saw it, currency debasement authored the negative symptoms that destroy faith in government and laws.

Debasement eroded property rights and with it respect for government itself. Worse, those who suffer the very real theft that is inflation would in Chivvis's words "put their energies into obtaining gains through political action against other members of their society rather than through productive pursuits." For modern evidence of the truth supporting Rueff's thinking, we need only consider the myriad individuals and businesses presently lined up in Washington to secure stimulus funds previously stolen from them through taxation, and most notably dollar debasement.

As for the Keynesian approach to economics that is all the rage among economic bureaucrats the world over, the author suggests that Rueff's aversion was visceral. As Chivvis noted, "To Rueff, Keynesianism was a disease, a drug politicians used to placate the masses." Certainly true, yet much like other statist attempts at unreality prove, eventually the masses wake up (as they are now) to the greater reality that governments can only give to individuals what they've taken from them first.

Rueff understood that "aggregate demand" couldn't disappear as Keynes believed, and as so many economists today still believe. Income, by his lights, determined demand, as in we can't demand unless we've supplied first. To spur demand, governments would have to remove the barriers that kept producers from supplying. Furthermore, Rueff noted that "revenue is engendered by production", which to this writer signaled his understanding of the tautology that governments lacking resources can only spend the revenues provided to them by the private sector in the first place. In that case, why would governments wastefully spend the resources created in the market economy? If they do, why would any economist believe this could be stimulative?

Considering the budget deficits that concern so many at present, they were similarly bothersome to Rueff. In L'Ordre Social, he wrote that individuals should "Be liberals, [or] be socialists, but do not be liars." To Rueff, deficits were a signal of a lack of political consensus whereby an inability to pass spending bills through normal political channels led to deficits. Gold-defined money would of course serve as the barrier to deficits given the inability of governments to devalue their way out of them.

As someone who witnessed war up front during World War I (an optimist of sorts, he noted that the war saved him "from the ungrateful age of adolescence"), Rueff felt that the currency stability wrought by a gold definition enhanced the very international trade that made wars less likely. Sure enough, the great expansion of trade in the more peaceful 19th century eventually reversed course on the way to barriers in the 20th, thus making the tragedy that was World War I far more likely. To Rueff, the peaceful benefits of stable money essentially matched and occurred in concert with the economic growth that makes war a major hindrance.

Quite unlike the mercantilist leaning bureaucrats that dot the international economic bureaucracy today, Rueff felt that trade was not war. Instead, as Chivvis writes, Rueff's "vision was basically transatlantic, and he saw the transatlantic economy as a natural extension of the European economy and the foundation of Western civilization." In short, the economic success of the U.S. would redound to Europe, and European success would accrue to growth in the United States. To put it more simply, if head of the ECB today, Rueff would not be concerned with China's pegging of the yuan to the dollar, euro or any other semi-credible currency. Amen.

Readers of this review might think Rueff was a libertarian of the modern variety. Not exactly. Right or wrong, Chivvis writes that Rueff believe that "the market existed thanks to the state, and not vice versa." Rueff felt that the state had a role beyond protecting property rights, which is contrary to the thinking of many of today's libertarian thinkers. At the same time he felt that free markets were far superior to collectivism, and felt a lurch in that direction would undermine all the market-based progress that had made Europe so prosperous.

It's also the case that he was not a market liberal in the sense that he wanted to protect the bourgeois class from which he emanated, and eventually maintained membership in through marriage to a high-born French woman. Indeed, liberal economics is all about change at the top, and modern evidence supporting this claim is most obvious when one looks at how the Forbes 400 "team picture" changes on a yearly basis.

Rueff achieved his greatest prominence in 1958, when a desperate France looked to Charles de Gaulle for more stable leadership. Though they weren't soul mates on all matters economic, de Gaulle shared Rueff's monetary views, and once observed about gold that it was "the unalterable fiduciary value par excellence." More simply, gold's value doesn't change; instead the currencies in which gold is priced change on the way to a floating gold price.

Though Rueff was a tireless advocate of gold-backed money, he wasn't a fan of the Bretton Woods dollar standard that had the world pegged to the dollar, and the dollar to gold. He felt that Bretton Woods wasn't strict enough owing to wiggle room within the pact allowing for countries to devalue or change their currency's relationship with the dollar "as underlying conditions warranted", plus with the dollar serving as the world's currency, they could settle international accounts with paper currency rather gold. The latter was the west's "monetary sin", whereby a dollar eventually not as "good as gold" was proxy for the metal just the same.

Rueff had a point, but just as a dollar peg to gold surely allowed U.S. monetary authorities to be less disciplined, so would gold as money be unwieldy for there not existing enough gold in the world to back every currency. Rueff likely wouldn't agree, but a Ricardian gold standard is most ideal today, whereby the U.S. Treasury would target gold's market price with very little gold in reserve. If gold's price in dollars were to remain stable, as in if Treasury maintained a real commitment to a stable dollar in gold terms, there would be very little in the way of redemptions given the desire of individuals to hold the paper proxy for the yellow metal.

Regarding the world's move to floating currencies in the early ‘70s, Chivvis writes that Rueff worried "floating rates would render international trade uncertain", and that this would encourage protectionism. As is well known now, the move to undefined currencies certainly did engender a lack of harmony when it came to trade, not to mention that Rueff was similarly correct in his prediction that floating money would create a "breeding ground for recession and unemployment." That there were three recessions amid rising unemployment in U.S. alone in the decade after the collapse of Bretton Woods surely proved Rueff's visionary capabilities.

Probably of greatest interest to readers given the times we're in would be Rueff's views on the causes of the Great Depression. Very unlike the government bureaucrats of today eager to sell free markets down the river as the cause of our latest economic crack-up, Rueff defended market forces back in the 1930s.

Instead, Rueff saw the economic problems as firstly a result of politicians unwilling to face realities. Instead of letting the prices of everything - including labor - adjust to new economic realities, bureaucrats created disequilibrium, most notably through unemployment benefits meant to soften the blow of being unemployed. Rather than make life easier, the benefits retarded the natural way in which the cost of labor reached its market-clearing level, thus keeping rates of unemployment abnormally high.

Governments during the Great Depression created what Rueff termed "an immense chaos". Or as he put it more clearly, "Everywhere, in all areas, equilibrium is disrupted: Equilibrium between production and consumption, between supply and demand for labor, between the need for credit and the supply of capital, between the external credits and debts of states." In this very real sense, we can long for a modern Jacques Rueff high up in government who would see how very problematic are the government's interventions in labor, credit, production and everywhere else.

About gold, far from a cause of the Great Depression, the broad movement among governments away from stable money values in the 1930s led to the global economy's disintegration as world trade collapsed, and countries naively moved in the direction of autarchy. In that sense, we shouldn't be surprised that the decline of global trade led to World War II, and just the same that the global economy bounced back powerfully post-war despite a massive fall in government spending. Whatever the faults of Bretton Woods, it was a pact entered into to ensure a resumption of the very trade that expands the division of labor, and with it, both economic efficiency and peace.

As for disagreements with the author, since The Monetary Conservative is a biography more than an economics book, it was hard to find too many. Midway through Chivvis referenced "liquidity preferences", which really wouldn't mean much given the simple truth that money's sole purpose is as a measuring rod to facilitate exchange. Further on there was talk of France having "too much savings", but then savings are the fuel of all economic activity, which means there can never be enough.

Chivvis argued that France staying with gold in the ‘30s weakened its competitive position, but this line of thinking has never been proven. For one, the author ignores the "unseen" impact on investment in France assuming a devaluation, not to mention that Japanese exports to the U.S. have skyrocketed amid the yen's crushing of the dollar over these last four decades. Money is always and everywhere a veil, and the notion that strong money harms exports is at best true in theory, while proving wanting in reality.

As a writer who is most interested in monetary affairs, it also seemed as though Chivvis did not spend enough time on Rueff's views on monetary policy itself. What did he think of the Federal Reserve and central banks more broadly? Did he long for Bretton Woods and its flaws after seeing the true inflationary outbreak that occurred in its aftermath?

Beyond all that, The Monetary Conservative is an important read for the issues Rueff faced being very much with us today. What we'd give to have someone in government somewhere making the classical liberal case for non-intervention when government error fosters the inevitable crack-up.

Most of all, we could use someone of his intellect carrying the stable-currency flame. Indeed, Jacques Rueff saw inflation as immoral, and as something that "would make the masses more susceptible to the allure of tyrants masquerading as conservatives and promising to restore order." Just a thought, but it seems Rueff predicted the future there in terms of an existing president who grew popular amid the currency debasement overseen by his predecessor.

In conclusion, The Monetary Conservative should be read by individuals of all political ideologies interested in the political economy. To do so is in many ways to understand why we are where we are today, and why we elected our current president.

John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015). 

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