Secretary of State Frank Kellogg

It’s conventional to treat inter-war American foreign policy with a kind of contempt. This was the era of “isolationism” in which the United States is said to have engaged in the folly of believing that Europe could handle its own problems in a manner that didn’t require American interventionism. US policymakers went in for such daft notions as arms control treaties limiting the size of navies, and even the Kellogg-Briand Pact, an international agreement to “outlaw war.”

Meanwhile, if you read coverage of the global financial crisis, it seems to be the case that the consensus among economic historians is that the Great Depression was a preventable disaster. A stock market crash and a downturn of some kind look fairly inevitable, but US policymakers could have responded quickly expansionary monetary policy, the sort of bank guarantees that became the FDIC in the late-1930s, and a willingness to run federal deficits to maintain the (then rather modest) size and scope of public sector activities.

Similarly, if you look at the history of Germany, the Nazis were not an especially large, powerful, or influential political movement. Indeed, as of 1928-29, the troubled Weimar Republic looked to have substantially stabilized itself. It seems very plausible to imagine that a normal economic downturn, rather than a years-long total collapse, would have prevented the Nazis from ever coming to power.

And had that happened, is it really so implausible to think that the US foreign policymakers of the 1920s would have looked pretty vindicated? Not that all wars would have been avoided, of course, but that the era of great power wars would have ended in 1918 rather than 1945, not because of a difference in foreign policy but because of a difference in macroeconomic management? Was it really so naive of Secretary Kellogg to have not foreseen an unprecedented economic collapse years in the future leading to the rise of an unprecedented political movement?

As you’ve probably heard, one important reason that policy options under conditions of a severe downturn get controversial is that the uncontroversial recession-fighting measure—lower interest rates—stops working when the interest rate gets down to zero. When you’re at the legal bound, there are things you can do with monetary policy, but they’re controversial. And there are things you can do with fiscal policy, but they’re also controversial. Under the circumstances, doing away with the zero bound might be useful. And in Japan, they’re considering the possibility that negative interest rates would be possible if only you did away with cash:

He said that all the proposals were radical but worth consideration for Japan. Without physical cash, a central bank can set rates exactly where it likes, runs the argument. Mr Jerram said: “At the heart of the problem of achieving negative nominal interest rates is the idea that physical currency is an anonymous bearer bond with a nominal interest rate of zero.” While a central bank can impose positive or negative rates on non-physical assets, transmitting those rates to physical currency is a huge challenge. By permanently removing cash from a system, he added, policymakers are robbed of the excuse that zero is the lowest that nominal rates can go as a deflation-fighting tool.

A cashless economy would also presumably reduce the possibilities of tax evasion and criminal activity. More for those kind of reasons, I suspect that more countries will start looking at this option in the decades to come.

WorldNetDaily has been trying to hype up poll results that allegedly show a majority of the public shares their conspiracy theory doubts about the location of Barack Obama’s birth. Dave Weigel takes a closer look and finds that the real number of Americans “troubled” by these rumors is more like 7.8 percent.

Of course the genius and the tragedy of America is that in such a large country as ours, that adds up to tens of millions of people! And if you look at the popularity of UFO conspiracy theories and other things, you can probably assume that this sizable fringe will always be with us.