Friday, February 13, 2015

Talking the Crazy Is Easy, Doing the Crazy Is Hard

If he became president, would he "audit the Fed?" Probably not.

Paul Krugman lets one fly today as he attacks "the crazy" he sees in today's Republican Party when it comes to monetary views. More specifically, he rips into Rand Paul, Paul Ryan, John Taylor, and others who sent an open letter to Fed chair Ben Bernanke in 2010, warning of the dire hyperinflationary consequences of the Fed's program of quantitative easing, know as QE1,QE2, and QE3 (the one we're currently backing out of slowly).

The prevalent views on monetary policy -- the constant warnings that Fed action "printing money" will debase the currency and bring on inflation Armageddon -- among the elite of the GOP are bunk, says Krugman, and have been debunked over the last few years. Lots of easing, near-zero inflation. Yet the crazy goes on:
Modern money — consisting of pieces of paper or their digital equivalent that are issued by the Fed, not created by the heroic efforts of entrepreneurs — is an affront to that worldview. Mr. [Paul] Ryan is on record declaring that his views on monetary policy come from a speech given by one of Ayn Rand’s fictional characters. And what the speaker declares is that money is “the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. ... Paper is a check drawn by legal looters.”
Once you understand that this is how many conservatives really think, it all falls into place. Of course they predict disaster from monetary expansion, no matter the circumstances. Of course they are undaunted in their views no matter how wrong their predictions have been in the past. Of course they are quick to accuse the Fed of vile motives. From their point of view, monetary policy isn’t really a technical issue, a question of what works; it’s a matter of theology: Printing money is evil.
Krugman also drills into Rand Paul's views:
Right now, the most obvious manifestation of money madness is Senator Rand Paul’s “Audit the Fed” campaign. Mr. Paul likes to warn that the Fed’s efforts to bolster the economy may lead to hyperinflation; he loves talking about the wheelbarrows of cash that people carted around in Weimar Germany. But he’s been saying that since 2009, and it keeps not happening. So now he has a new line: The Fed is an overleveraged bank, just as Lehman Brothers was, and could experience a disastrous collapse of confidence any day now.
This story is wrong on so many levels that reporters are having a hard time keeping up, but let’s simply note that the Fed’s “liabilities” consist of cash, and those who hold that cash have the option of converting it into, well, cash. [...]
Krugman is rightfully worried that one of these GOP monetary crazies could become president -- as unlikely as it seems now with Hillary Clinton in command of the polls -- and drive monetary policy into an Ayn-Randian ditch.

But here's the thing: It's easy to talk the crazy for the Republican base, but if you actually get elected president it's hard to walk the crazy into reality. For reality is a strong tonic when you actually have to govern. As woe-begotten as George W. Bush's economic and war policies were, he still managed to tamp down a lot of the crazy and, well, govern like actions had consequences. He still ended up near the bottom of history's judgment of who were the worst presidents. Hopefully that's a warning to a Rand Paul or a Jeb Bush that, once in the Oval Office, sense needs to prevail.

Frat boy didn't completely ruin the country. The dynamics of the office has a way
provoking seriousness, even among the least gifted. He approved TARP, for god's sake.

Of course, heaven help us if I'm wrong.

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