Jews, Protestants, and Central Banking

Christopher Mahoney, a former vice chairman of Moody’s, has a piece arguing that Protestants will never understand monetary policy because their moralistic worldview makes them incapable of accepting that monetary stimulus offers a real life free lunch. He suggests that we leave this to the Catholics and Jews.

Now it looks to me like in real life we’ve never had a Catholic Federal Reserve Chairman. But if we look at Jodi Beggs’ data on annual inflation by Fed chairman, we can see that the Chosen People have not done very well at monetary matters in practice. Of the men on this list, five—Meyer, Burns, Miller, Greenspan, and Bernanke—have been Jewish. Eccles was Mormon. The rest were Protestant. And sorry to say it but Meyer, Burns, and Miller are the worst chairmen we’ve had. Meyer allowed years of deflation and depression. Burns and Miller both refused to curb inflation. Greenspan and Bernanke are both mixed bags. Obviously Greenspan fell down on the job as a bank regulator entirely. On the other hand, he did an excellent job of resisting calls for tighter money in the mid-1990s and brought us the only period of sustained working class wage growth in decades. Bernanke, I would say, has failed relative to an abstract standard of what we would want to see a Fed chairman deliver (rapid recovery), but he has performed much better than the leaders of the world’s other major central banks. The main axis of conflict during the Bernanke years has been him fending off wrongheaded criticism from people urging tighter money, so all things considered he’s done a good job.

But the real heroes of American central banking are Protestants—Eugene Black who knew when to inflate and Paul Volcker who knew when to disinflate. William McChesney Martin I would say ranks alongside Greenspan as a bit of a mixed bag. No coincidence that Martin and Greenspan are the two really long-tenured Fed chairmen. The more years you put on the job the more likely you’ll eventually mess something up.

Eccles’ term in office is a little hard to evaluate since the unusual circumstances of fighting World War II and then post-war demobilization loom large in it. The tight money episode of 1937 was a disaster, but mostly you’d have to say his term in office consisted of recovery from the Depression and victory over Hitler. Not bad at all.