When the Federal Reserve decided to loosen monetary policy in September 2007, not many people criticized it. The vote was unanimous. Few congressmen said anything about the move. Three years later, inflation was lower and unemployment higher than in 2007. But the Fed’s move to loosen money in mid-2010 aroused fierce opposition from conservative politicians, economists, and journalists. Sarah Palin complained that “printing money out of thin air” would “erode the value of our incomes and our savings.”
Republicans and conservatives have started to take a much harder line against inflation and a Federal Reserve they consider too inclined toward monetary expansion. In the early 1980s, supply-siders would sometimes criticize Paul Volcker’s Fed for fighting inflation too vigorously. Few on the right say anything similar today.
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This rapid shift in positions has several causes. The view that overly loose Fed policy contributed to the housing bubble of the last decade became the conventional wisdom. The massive expansion of the money supply in the wake of the financial crisis alarmed many observers. But the shift in position was also a testament to Representative Ron Paul’s dogged campaign against the Fed and its allegedly inflationary ways, and for a gold standard. If not for the Texas Republican — who has long been the congressman most interested in monetary policy, and now chairs the subcommittee with jurisdiction over it — it is hard to imagine that Newt Gingrich would have proposed a new commission to examine the gold standard, or accused Fed chairman Ben Bernanke of being “the most inflationary, dangerous, and power-centered chairman of the Fed in the history of the Fed.”
Many Republicans tell pollsters that they will not vote for Paul because of his foreign-policy views. Nobody says that his monetary views are a deal breaker; no pollster even bothers to ask. There is no organized opposition to Paulite views on money within the Republican party or conservative movement, and the people who hold those views hold them intensely. Thus the progress of those views.
Yet Paul’s views are a long way from dominance. The next Republican president’s appointees to the Fed will not insist that the money supply never increase. Most of the economists in his administration will not be supporters of the gold standard, or opponents of the Fed’s existence. What Paul has accomplished is to set a tone for the economic-policy debate on the right.
In End the Fed, his 2009 book, Paul writes that a rotten monetary system underlies “the most vexing problems of politics.” In his view, any expansion of the money supply counts as inflation, whether or not prices rise. (That’s also the definition Gingrich is using, since Bernanke can’t be convicted of record inflation defined as price increases.) If prices stay flat after an expansion, it means that they would have fallen without it. The expansion is thus a form of theft from people who must now pay higher prices than they would otherwise pay, and especially from savers, whose money becomes less valuable than it would otherwise be. Expanding the money supply thus discourages saving and encourages consumption. Paul goes so far as to say that it is the Fed that has led to people’s being “enslaved to their high credit card debt, the college loans, their car and home loans.” This “personal fiduciary bondage . . . simply could not be part of a free society with sound money.”
Paul follows the Austrian school of economics, which holds that the expansion of the money supply (or, in some variants, the overexpansion of it) is the reason we suffer through business cycles. Loose money artificially lowers interest rates and misleads businesses about the demand for capital goods, causing them to invest in the wrong lines of production. Eventually the “false” or “illusory” prosperity of the boom gives way to a bust in which these malinvestments have to be painfully liquidated. Efforts to mitigate the pain merely prolong the necessary process. In End the Fed, Paul treats the entire period from 1982 through 2009 as “one giant financial bubble” blown up by the central bank. (At one point he dates its beginning to 1971.) Absent his preferred reforms, “we should be prepared for hyperinflation and a great deal of poverty with a depression and possibly street violence as well.”
Your cure for the Fed sounds like most cures for the tax code. Tinker around the edges, but keep the basic unwieldly structure. What people are arguing for is to cleanse the system of the rot that has accumulated over time. Get rid of the tax code completely and start over with a cleaner system that is easy to follow and is revenue neutral. Get rid of the FED over time and introduce a competing system of currency based on something solid. A modified gold standard, a basket of commodities, whatever. Introduce some system of term limits for congress so entrenched incumbency doesn't produce the cronyism and insider trading that makes the system easy to game by those in the club.
If it was just the FED that was causing the problems of America, it could probably be fixed pretty easily. Paul's stance is that it has become the root cause of all the problems facing a once free and productive society.
Your article will do little to convince those that have studied the entire career of DR. Paul and done their own homework, that the FED and the income tax are exactly what he has said they are. A cancer on liberty and affront to the constitution your founding fathers drafted to ensure it's survival.
If he wins, and is able to implement his platform, there is no doubt that the U.S.A. will recover and start to economically dominate the free world again. If he loses, the movement he has started will only grow larger, and an ever increasing percentage of your population will demand the changes he has put forth.
The FED's only play at that point, if it is to maintain power, will be to crash the dollar. If that doesn't bring anarchy to the streets, nothing will. And all the predictions Dr. Paul made will have come true.
Nice, but it is time to grow up. The FED is not evil. Like anything made by man, it can become corrupted or misguided...but not evil. The solutions Dr. Paul proposes are really a throw-back to pre-industrial days. The Gold standard and the like is a nice-sounding idea when one wear blinders. Just one aspect of the short-comings of Paul´s gold proposal: think about all the homeowners out there...the over 95% of them that pay their mortgages whether they are underwater or not. Think about how many of them would have actually been able to purchase a home without the FED and Fannie Mae and Freddie Mac. Virtually none of them. Same goes for those nice expensive cars and leases. Same goes for your freakin IPad or IPod or whatever. Banking would go back to the good old boy way of financing...where you had to know someone to get a loan. That usually favored the wealthy and discouraged the entrepreneur.
Ron Paul´s delusional throwback to the early colonial days of America actually kind of makes sense since his view of the Constitution is not Constitutional at all, but rather the Articles of Confederation. It also explains those racist newsletters and conspiracy fantasies. Either way, it´s a primitive view made for sheeple who have no conception of the complexities of the economy and life in general.
Well now, since you have such a firm grasp on the complexity of an economy and life itself, maybe you'll appreciate the rebuttal of a simpleton.
The fact is that the Fed is in control of more than it can manage from the standpoint of humankind's limited knowledge in the face of a complex-adaptive entity (such as an economy or an ecosystem). The question is whether or not we are walking off a cliff, thinking our methods of economic analysis are sufficient to steer a system that is made of up millions of unpredictable, self-asserting, deciding, rationally irrational variables called human beings who--wait for it--react to each other based on accumulated experience and ever-altering expectations. The gold standard is no sacred cow: the market should determined what the standard of measurement should be via competition and innovation, as apposed to a supposed authority on an unknowable subject.
Ron Paul isn't a throwback to anything but the fundamentals of economics. A new appreciation for Say's Law. A revitalized interest in the Austrian perspective (which isn't without its flaws--no theory is). Keynes was correct in identifying the complexity problem as it pertains to predictability in economic behavior, but he completely missed his own Self Exclusion fallacy when he handed his convenient yet botched worldview to the academically and politically "anointed". Markets are irrational because people are irrational, and thus need government direction, yet people make up government!
The point is that no one knows what needs to be done. You don't know how many houses would have been supplied or demanded absent Fannie/Freddie, etc. You just don't, and neither does Bernanke. Concentrating the decision-making process in a few hands and condemning those who wish to see a competition of innovative approaches is tantamount to condoning Authoritarianism. People who share Paul's economic views are neither sheeple nor primitives. They understand that the Fed doesn't understand what it is doing. Understand?
Well now, since you have such a firm grasp on the complexity of an economy and life itself, maybe you'll appreciate the rebuttal of a simpleton.
The fact is that the Fed is in control of more than it can manage from the standpoint of humankind's limited knowledge in the face of a complex-adaptive entity (such as an economy or an ecosystem). The question is whether or not we are walking off a cliff, thinking our methods of economic analysis are sufficient to steer a system that is made of up millions of unpredictable, self-asserting, deciding, rationally irrational variables called human beings who--wait for it--react to each other based on accumulated experience and ever-altering expectations. The gold standard is no sacred cow: the market should determined what the standard of measurement should be via competition and innovation, as apposed to a supposed authority on an unknowable subject.
Ron Paul isn't a throwback to anything but the fundamentals of economics. A new appreciation for Say's Law. A revitalized interest in the Austrian perspective (which isn't without its flaws--no theory is). Keynes was correct in identifying the complexity problem as it pertains to predictability in economic behavior, but he completely missed his own Self Exclusion fallacy when he handed his convenient yet botched worldview to the academically and politically "anointed". Markets are irrational because people are irrational, and thus need government direction, yet people make up government!
The point is that no one knows what needs to be done. You don't know how many houses would have been supplied or demanded absent Fannie/Freddie, etc. You just don't, and neither does Bernanke. Concentrating the decision-making process in a few hands and condemning those who wish to see a competition of innovative approaches is tantamount to condoning Authoritarianism. People who share Paul's economic views are neither sheeple nor primitives. They understand that the Fed doesn't understand what it is doing. Understand?
Deconstructing the central planning argument in an attempt to deflect the point was a clever maneuver on the part of the author, but the author appears to confuse a difference in effect for a difference in process. The process remains the same. Currency is being managed by central planners, regardless of whether central planning is occurring in the most technical sense. Their actions artificially act upon and often lag behind the market, because as "samwell the simpleton" so astutely points out there's no way to stay ahead of or even sufficiently "steer a system that is made of up millions of unpredictable, self-asserting, deciding, rationally irrational variables called human beings who--wait for it--react to each other based on accumulated experience and ever-altering expectations." One need only rewind back to statements out of the Fed that were wholly disconnected from reality to "understand that the Fed doesn't understand what it is doing." Or, at minimum, this shows dishonestly upbeat public comments were being made while private reservations were being held close to the chest.
Rather than modifying the dumb bomb to make it self-guiding, you appear to prefer strapping a couple fins on to make it slightly less dumb. Hitting five feet closer to the target won't change the fact that targets will be missed and collateral damage will continue to occur.
This article will do little to convince - as you so pretentiously put it - "those that have studied the entire career of DR. Paul" because most of you are unreasonable nuts divorced from reality. Even if abolishing the Fed made partial sense, which it doesn't, what you loons don't understand is that it will never happen.
Unfortunately for Iran, North Korea, Syria, and other regimes (and terrorist groups) that threaten us, Paul will never, ever win the nomination.
Why not convince the good doctor to get out of the way so we can at least perfrom triage and get Obama out of the WH? I suppose that would make too much sense.
Iran is not a threat to us nor Israel. We have zero evidence they are attempting to create a nuclear weapon and even our officials state this. The fearmongering of our media is obviously getting through to you.
That's hilarious, you take a article that says A & B cause inflation (gas and food prices increase), only to pretend it says the opposite: inflation causes A & B.
Quote:
"Food and gasoline price rises accounted for most of the [inflation] increases, with gasoline accounting for almost half of the month-to-month rise [in inflation]."
Title of the article:
"Rising Gas and Food Prices Push U.S. Inflation Higher"
Well, lets not forget that Ben stated that those prices are "trasnsitory." Look, we have a failed monetary poilicy and it's as simple as that. No need to try and make it more complex or incomprehensible. The Fed is an enabler of debt and if you're on the "outside looking in," then you are simply on your way to "serfdom." Just consider this quote: "The rest of us have had to rely on leverage, aided and abetted with financial technology, to maintain the illusion of rising real incomes." Niall Ferguson
Sure productivity increases durig "bubbles," but the means of purchasing those goods and services is illusionary, to say the least. Again, if you don't understand the system in which we are entrenched, then you will be punished severely which is why we all get ot live and witness Einstein's definition of "insanity" on a daily basis. The majority is not always right which is why we're a republic but I refuse to reap what others have sown for themselves. Knowledge is power and comprehension is freedom. Let It Ring!
Well, the answer is neither, when you have hurricane force winds, then whatever is worth anything will be picked up and blown away at the same speed.
Inflation doesn't mean everything increases in price, it means that ELASTIC items increase in price --- RAPIDLY.
Why? Well, due to monetary policy. There is money in the system that is finding a place to go. Things that are in the most demand and in the least supply will increase faster than everything else, or using my analogy, the money will find whatever is not tied down.
Since gasoline and food prices are extremely elastic (ie, demand and supply dependent), then you will see inflation in those goods.
Whereas, land in the middle of nowhere, or other items, are not increasing in price.
The problem is that they are not DECREASING in price. We need DECREASES in prices for INELASTIC goods and services in order to make them productive again, otherwise, they will sit idle...
So, you don't need to believe that A causes B, or B causes A, because it is neither. Stop thinking like Krugman and the academics. Academics are limited by their pride and not by their bottom lines. If they were running real businesses, they would be far more pragmatic in their thinking.
There is definitely a definite, necessary logical order behind changes in the money supply and changes in the "price level." While you are correct to say that,
"Inflation doesn't mean everything increases in price," it does not follow that "ELASTIC items increase in price --- RAPIDLY."
Inflation is a continual process. It consists of an additional demand for goods and services being introduced as media of exchange into the economy. Now, the initial receivers of the "new money," (i.e. whoever gets it first, in most instances the major investment banks and government employees generally), spend their income on a particular assortment of goods and services. Absent the creation of the new money, the prices paid for these same particular goods would have been lower to some degree than they are following the introduction of this additional money demand. These goods, therefore, are the FIRST to increase in price.
The second series of goods to increase in price are those typically purchased by the secondary receivers of the new money, and so on and so forth.
The money eventually filters throughout most of the economic system, causing the prices of most everything to increase. However, because there is a "transition period" between the time of the introduction of the new money, and its final circulation throughout the entire economic system, it is clear that the prices of certain goods and services (those demanded by the intial recievers of the new money), will rise FASTER than will the prices of those goods and services typically purchased by the last group of people to recieve the increased nominal income. Therefore, inflation is always redistributive.
Your "Elastic" goods idea (by which I take you to mean those goods whose market has an elastic DEMAND curve) truly confuses me. The nature of an economic price is to be set at that point where the demand curve becomes INELASTIC, that is, prices will only increase to the extent that they can before the quantity demanded falls off precipitously. But the real point is that the demand curve has "shifted" due to the increased nominal purchasing power. I.E. a greater quantity will be demanded at any price. The demand curve will shift (to the right) for those goods that are typically demanded, as I outlined above, by the intial recievers of the new money. And then, subsequently, the nominal demand for more and more goods will shift outward.
We need to have a monetary policy that continues to have the little people bailout the 1%ers like Mitt and Obama's cronies. We should not have a system where the 1%ers cannot manipulate it for the benefit.
I wouldn't attack Ron Paul too harshly if I were you, Mr. Ponnuru. Remember, you're going to demand those Paulites vote for your candidate in the Fall...and not get so angry that they insist that Ron run as an Independent and drain votes from the GOP.
I don't know whether establishment neocons or the RNC will learn to be more circumspect in this regard. For instance, the republican party will surely provoke spite-votes for Obama in November if they continue rigging caucuses for their man Mitt as they did in Maine. [Note: the brief rundown on the Maine caucus fix is this: the Maine party chairman Charlie Webster (Mitt supporter) ordered the cancellation of 16% of caucuses, ostensibly because of an oncoming snowstorm (which never came), in areas where Paul would have done well. Also, the official tally has blatantly reported the wrong results for a number of precincts, which helps to explain why the party ordered the precincts not to announce the straw vote results aloud at their respective caucuses. Some contravened this order, and now they are the ones who can testify that their votes were wrongly attributed to Mitt.]
NEOConservative refers to a new conservative school of thought different than the "Old Right". The "Old Right" was a response to the horrible polices of FDR.
Post WWII the Trotsky-ites such as Bill Kristol's dad and Leo Strauss and Chicago Univ, supported big govt and an aggressive foreign policy. They did not have any attachment to the American tradition of individual Liberty and constitutional limits on the state. Instead they preferred a Machiavellian totalitarian state, welfare and warfare. These folks initially started n the Democratic party and when they could not bring it to their ideology moved into the GOP.
