Monetary Policy and the Republican Party
It firmly roots the agenda of Rick Perry and Ron Paul in the tradition of Jefferson and Jackson and I’d highly recommend a read of it.
However (and to be fair they do acknowledge this in the post) I think there is a very important difference between the latest bout of GOP Fed-bashing and the long history of anti-bank politics in the US: the radicals are attacking the Fed not sticking to ‘hard money’ policy of high rates but for being too lax.
And this is, for me at least, a bit of a conundrum. There is now a (sizeable?) constituency in US politics arguing for not only fiscal tightening but monetary tightening as well (in the UK Fraser Nelson too seems to be in this camp).
The whole argument of the ‘Expansionary Fiscal Contraction’ camp is that government spending cuts allow the central bank to keep interest rates low and this supports the recovery. Whilst I may disagree with that argument I can at least understand it.
What I can’t understand is policy makers arguing for tight monetary policy coupled with tight fiscal policy at a time of faltering global demand. That’s a recipe for depression and the fact that major political figures are now advocating it is a worry to be very concerned.