The coming right-wing front on monetary policy
In May 2010, the Maine state Republican convention produced and voted for an ultra-conservative platform ("investigate collusion between government and industry in the global warming myth, and prosecute any illegal collusion. ... Repeal and prohibit any participation in efforts to create a one world government") out of nowhere, showing at how far off-center the local parties were becoming and hinting at how that might influence national politics. One item I and others noticed in there was this: "Pass and implement Fed bill #1207 (Introduced by Ron Paul), to Audit the Federal Reserve, as the first step in Ending the Fed."
I was interested in the Audit the Federal Reserve amendment (I did an interview with Dean Baker around that time on it), one of the few items to gain bipartisanship traction. But I understood it as the first step in promoting a more transparent, accountable Federal Reserve that is less dominated by the interests of regional bankers and the financial sector, not as a first step toward abolishing it.
What a bizarre time for monetary policy and the conservative right. First Ron Paul, who wants to "End the Fed," is put in charge of Federal Reserve oversight with the GOP taking over the House. Sara Palin attacks inflation, quoting Reagan as saying it is “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man." World Bank President Robert Zoellick wants to return to a gold standard. Kansas City Federal Reserve Bank President Thomas Hoenig, who wants to raise interest rates because he is worried unemployment might come down too quickly, will be advising the House GOP. The conservative guns are now moving from fiscal policy toward monetary policy.
Palin is a savvy reader of where the grass-roots conservative mind is going, so if she is starting to move the goalposts on attacking Bernanke, there's probably a larger move going on. And I'm curious to watch this battle unfold between the far right and the center right. The center right has been building fortifications in sensible thinking about monetary policy during 2010, in advance of this wave election. Back in February, David Frum wrote against Ron Paul's crusade against the gold standard, an argument he's been having since at least 2007 with the Paul team.
And Josh Barro, who also noted the Maine state convention anti-Fed argument, wrote a story for the National Review, "Mend the Fed," where he argues against the rapidly growing mainstream conservative argument of abolishing the central bank and moving toward the gold standard ("It does not follow, however, that we can do without a central bank or that we should return to the gold standard. Indeed, these moves would expose the United States to sharper business cycles and more frequent banking panics -- all to solve an inflation problem that doesn’t exist").
I do wonder how this battle inside the right will play out over the next few years, years in which the Federal Reserve actually being able to hit its inflation target would make the difference between the prospects of a generation being economically productive or a generation lost to hysteresis and isolated from functioning labor and economic markets.
| November 10, 2010; 11:15 AM ET
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