FDR, Obama and 'Confidence'

Mr. Geithner is gradually discovering that to recover, the market needs a specific kind of confidence. It is not something Washington can hand down. It is not even demand confidence—the confidence of the consumer who wants to shop. The confidence relevant to recovery is the confidence of the investor and the saver. It comes only when an administration in Washington demonstrates reliability and restraint.

Unfortunately the importance of this specific version of confidence tends to take a while to sink in. And that in turn tends to delay general recovery. This is what the painfully halting education of another U.S. Treasury secretary long ago, Henry Morgenthau Jr., makes clear.
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Morgenthau started out in government with no notion of confidence at all. It was 1933, and President Franklin Delano Roosevelt knew he confronted an economic crisis. But the president didn't feel like working with the critical old Wall Street crowd. His first Treasury secretary, an establishment businessman named William Woodin, fell ill. Woodin's withdrawal did not upset Roosevelt, who liked to pilot the national ship himself. "I think father wanted to be his own Secretary of the Treasury," James Roosevelt would later write.Replica Rolex Daytona

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Treasury Secretary Henry Morgenthau with economist John Maynard Keynes, 1943.
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Over the summer of 1933, FDR found himself relying increasingly on someone he was sure would say "yes"—Morgenthau, his timid old Dutchess County neighbor who held a post at the Farm Credit Administration. With the aid of his "yes" man, Roosevelt launched a novel gold purchase program. The plan was to drive up the general price level by buying gold. Each morning, FDR set the gold price target, personally. This in turn was supposed to help farmers, who would get higher prices for commodities.

Theoretically, Roosevelt's idea of reflating can be defended. More money might mean more growth.Replica Rolex Day Date II

But the exposure to investors that Morgenthau was getting through the gold purchase project of 1933 was already teaching him something. Investors didn't like the arbitrariness. It took away their confidence. One day Morgenthau asked FDR why the president had chosen to drive up the price of gold by 21 cents. The president cavalierly said he'd done that because 21 was seven times three, and three was a lucky number. "If anyone ever knew how we really set the gold price through a combination of lucky numbers etc., I think they would be frightened," Morgenthau wrote in his diary. And they were: In the second half of 1933 a powerful stock rally flattened.