The U.S. Treasury, and the Exciting Arrival of David Malpass

The U.S. Treasury, and the Exciting Arrival of David Malpass
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With Janet Yellen expected to depart after her first term, interviewers frequently ask me whom I would choose as her replacement as Chairman of the Federal Reserve.  My answer is always the same: David Malpass. 

While the Federal Reserve presently serves no useful purpose such that its shuttering would affect a tiny percentage of the U.S. whole, the reality is that it still exists.  And it’s going to exist for a long time.

The Fed will always be with us simply because politicians will never abolish what is a convenient whipping boy every time the U.S. economy slows.  Even though the Fed’s influence over the economy is vastly overstated, its influence is thought to be substantial.  Politicians like to maintain this fiction for obvious reasons. 

Malpass is always my Fed answer simply because he’s very wise about matters economic.  Applying his wisdom to the Fed, Malpass is strongly of the view that the central bank’s approach to all matters economic should be very modest.  He would be an ideal Fed Chairman precisely because he would be a non-interventionist Fed Chairman.  To Malpass, less is generally more when it comes to government. 

So while it’s fun to imagine Malpass eventually replacing Yellen, the great news for now is that he’s been appointed undersecretary for international affairs at the U.S. Treasury.  His arrival is essential.  That’s the case because the U.S. Treasury is the mouthpiece for the U.S. dollar, and Malpass knows dollar policy as few do.

What’s crucially important is that Malpass understands that money is decidedly not wealth.  If every dollar in the world were vaporized today, the U.S. would remain the world’s richest country tomorrow.  Malpass views money as Adam Smith did, as a medium of exchange that facilitates the exchange of actual wealth.  Wealth is what we humans produce, while money is but a measure that speeds our exchange of the goods and services we create. 

The above matters a great deal now simply because the understanding of money within the political class is arguably at an all-time low.  More and more economists, pundits and politicians think the value of money can be tinkered with on the way to artificially grand economic outcomes.  Call it economic fabulism.  While in the real world money merely facilitates exchange and investment, to the fabulists who increasingly dot the economic landscape, money is the wealth.  And changes in its value can alter reality to our betterment.  To the fabulists, dollar devaluation is the path to prosperity.  They couldn’t be more incorrect.

What’s important is that Malpass expertly knows why the fabulists are incorrect.  He knows that the U.S. economy is but a collection of individuals, and individuals earn dollars.  By extension, he’s well aware that the American people aren’t made better off if the dollars they’re earning are being stripped of their value by monetary officials.

Taking this further, Malpass knows well that companies and jobs spring from investment.  That the latter is true explains why Malpass has written voluminous columns and reports, and has given countless speeches over the years preaching the virtue of money that is actually money.  Getting more specific, Malpass has long favored a dollar that is the same today as it is tomorrow, one year from now, and ten years from now. 

When a dollar holds its value over time much as a foot will be twelve inches tomorrow and twelve years from now, those with wealth can most comfortably direct it toward future wealth creation.  They can invest.  Malpass knows that when savers put money to work as investment, they’re buying dollars in the future.  But when money is being shrunken, the cost of delaying consumption in favor of investing in future Apples, Walmarts and Microsofts becomes prohibitive.  While investment is the tautological source of new companies and jobs, why invest if any potential returns will come back in severely devalued dollars?

Malpass knows all of the above, and much, much more.  With the U.S. Treasury focused on dollar and tax policy, Malpass understands that taxes are nothing more than a price, or a penalty placed on work.  He knows that taxes raise the cost of getting up and going to work, and since he’ll be the international face of Treasury, he knows that country taxes amount to a daily competition for the investment that authors all advance.  Malpass knows that investment goes where it’s treated well; specifically investment migrates to where it’s not being devalued through currency machinations, or through nosebleed capital gains taxes that suffocate intrepid investing in the first place.

How does all this apply to the American voter? It says here that more than most in the punditry realize, voters have long been clamoring for the policies that Malpass has been preaching for decades.  Plainly stated, voters want economic growth, and to reap the benefits of growth through ever-increasing living standards. 

What’s important is that all of the above can be achieved through the modest policy ideas that Malpass will bring with him to Washington.  Malpass does not come with arrogant solutions as much as he’ll bring common sense to the policy conversation.

Malpass will remind all around him that the average voter earns dollars, and as such is not made better off when those dollars buy less and less.  The average voter craves opportunity, and he’ll remind those in his orbit that dollar destruction is anti-opportunity because it’s anti-investment. 

Most of all, the internationalist in Malpass will remind those in his midst that a global economy speaks to global options when it comes to investing.  Malpass will alert those around him to the simple truth that dollar devaluation and excessive taxation stateside will cause investment to exit the U.S., and with it the economic opportunity that individuals want regardless of Party affiliation.

Simply put, David Malpass understands economic growth intimately.  What a great development it is that he’ll be bringing his expertise to the U.S. Treasury. 

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

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