The Wall Street Journal

Palin’s Dollar, Zoellick’s Gold
The Wall Street Journal

It would be hard to find two more unlikely intellectual comrades than Robert Zoellick, the World Bank technocrat, and Sarah Palin, the populist conservative politician. But in separate interventions yesterday, the pair roiled the global monetary debate in complementary and timely fashion.

The former Alaskan Governor showed sound political and economic instincts by inveighing forcefully against the Federal Reserve’s latest round of quantitative easing. According to the prepared text of remarks that she released to National Review online, Mrs. Palin also exhibited a more sophisticated knowledge of monetary policy than any major Republican.

Stressing the risks of Fed « pump priming, » Mrs. Palin zeroed in on the connection between a « weak dollar—a direct result of the Fed’s decision to dump more dollars onto the market »—and rising oil and food prices. She also noted the rising world alarm about the Fed’s actions, which by now includes blunt comments by Germany, Brazil, China and most of Asia, among many others.

Which brings us to Mr. Zoellick, who exceeded even Mrs. Palin’s daring yesterday by mentioning the word « gold » in the orthodox Keynesian company of the Financial Times. This is like mentioning the name « Palin » in the Princeton faculty lounge.

And here’s Mr. Zoellick’s sound-money kicker: « The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today. » Mr. Zoellick’s last observation will not be news to investors, who have traded gold up to $1,400 an ounce, its highest level in real terms since the 1970s, as a hedge against the risk of future inflation.