Now I have to tell you I don't by any means love everything about Bush or his administration. I'm not a Republican and I don't think of myself as a conservative. But I'm on the record as a big supporter of Bush's tax-cuts. I've talked about them with Bush personally, and I'm absolutely convinced that they're the right thing to do and that Bush deeply understands why they're the right thing. When I read that Krugman column, my heart stopped… $726 billion in tax cuts, 1.4 million jobs, $500,000 per job — each job pays $40,000. Bush is going to spend $500,000 to get $40,000? What is this crazy plan I've been supporting?
And then five seconds went by, and I saw it. $726 billion is the cost of the tax cuts over ten years. $40,000 is the average wage for one year. Krugman forgot to divide by ten! The Nobel short-list economist forgot to bloody divide by ten!
And the claim that Greenspan secretly kept the US on a gold standard:
By all appearances, whenever Greenspan saw the gold price falling, he took this as a proxy, or a distant early warning system, that the level of all prices would fall. This indicated that there were too few dollars — so Greenspan printed more (the Fed does that by lowering the Fed funds rate). When gold rose, he took it as a sign that all prices were rising, so there must be too much money in circulation. So he would sop some of it up by raising the fed funds rate.
As far as monetary policy was concerned, this was "the end of history." And it's probably no coincidence that just a couple years after Greenspan put all this in place, we saw the broader "end of history" that Karl Marx foretold when the Berlin Wall fell and the titanic struggle between communism and capitalism was concluded. But the winner wasn't exactly the one Marx predicted. That's no coincidence — the Pax Americana was made possible by a currency as good as gold, just as the Pax Brittanica had been a century earlier.
I have to admit this idea of a gold standard is one thing I have never understood. I read a lot of Ayn Rand in my college days and she was a huge supporter of it. But it always seemed to me that the implication behind it is that there is a constant demand for gold. I personally don't want a big bar of gold because I have no use for it. So the gold standard has never made sense to me. Saying I my money is guaranteed to be worth a certain amount of gold makes me think "who cares" because I only want the gold for what it can buy, which is the same reason I want money. Gold doesn't seem to have any value in and of itself. Maybe someone out there can explain this to me…
UPDATE: A comment pointed me to this explanation by Krugman.