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August 24, 2012 9:41 AM Deflation Sensation

By Ed Kilgore

As Republican convention organizers make fools-gold concession to Ron Paul Revolutionaries about the minutiae of monetary policy platform language, it’s worth remembering that there really are significant differences between the two parties on this obscure but critical topic. Mitt Romney made his views (and loyalties) clear just yesterday:

In an exclusive interview with FOX Business Network Thursday, presumptive presidential nominee Mitt Romney said he would not reappoint Federal Reserve chairman Bernanke when his term expires in 2014.
“I would like to select … a new person to that chairman position, someone who shared my economic views, someone that I thought was sympathetic to the needs of our nation and I want to make sure that the Federal Reserve focuses on maintaining the monetary stability that leads to a strong dollar, and confidence that America is not going to go down the road that other nations have gone down to their peril,” Romney said….
Investors have been keeping a close eye on the central bank, wondering if it will offer more quantitative easing or stimulus to help reboot the stalling economic recovery. On Wednesday, the Federal Reserve said it is considering additional stimulus moves as early as next month, actions Romney said won’t help.
“I don’t think QE2 was terribly effective, I think a QE3 and other Fed stimulus is not going to help this economy,” he said. “I think that is the wrong way to go. I think it also seeds the kind of potential for inflation down the road that would be harmful to the value of the dollar and harmful to the stability of our nation’s needs.”

So there you have it, if you had any doubt: Romney wants a Fed that considers inflation all seven of the deadly sins rolled up together, and would degrade the mission of monetary policy in reducing unemployment and sustaining economic growth even more than it’s been degraded by the Fed itself during Bernanke’s chairmanship. Considering the chronic goldbuggery of Romney’s running-mate, this would probably be the most reactionary administration with respect to monetary policy since Herbert Hoover’s.

You think a “fiscal cliff” threatens economic recovery? Just wait til we have cheerleaders for deflation in charge of monetary policy.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Josef K on August 24, 2012 10:08 AM:

    You think a “fiscal cliff” threatens economic recovery? Just wait til we have cheerleaders for deflation in charge of monetary policy.

    To which my first reaction is "So what?"

    I don't mean that sarcastically or as devils advocate, but seriously so what? The Fed hasn't proved effective at all in terms of actual stimulus, and at this point I'm hard pressed to believe it can do anything of actual, practical effect.

    Can someone explain this to me as one would a complete neophyte? Consider me a low-information voter and help me understand why monetary policy is an issue here.

  • c u n d gulag on August 24, 2012 10:14 AM:

    Maybe it's me, but maybe someone much smarter can explain this to me:
    I know unbridled inflation is bad, I know full well from living in the late 70's to mid 80's - but wouldn't a small rate of inflation actually be HELPFUL right about now?

    I mean, since we're handcuffed and tied to the bedposts while the Conservatives torture us, and don't BORROW FREE MONEY FOR A LARGE STIMULUS, and it's just sitting there doing nothing - wouldn't a small rate of inflation be a way of increasing the value of homes back closer to where they were before, and of increasing some investment by individuals, since interest rates would also rise?

    Am I missing something here?

    I mean, they make any inflation whatsoever sound like we'll all be back in Weimar Germany hauling wheelbarrows full of paper currency to buy a Twinkie, but it doesn't have to be that way.

    And, besides, all of these "expert" economists have been warning against some large stimulum because it'll cause inflation, the same ones who said that 3 years ago when we did that small stimulus, and there's been deflation? And at the same time, didn't we have a MASSIVE STIMULUS for the banks and fnancial firms - all without inflation.

    And how many of these were the same "expert" economists the same ones who told us at the end of the Clinton Presidency, that a surplus was the worst thing that might happen to America, outside of a meteorite hitting in the middle of the Heartland?

    I guess I know the answer to all of this:
    Pathological liers lie, and the grifters can continue their grifting by giving the pathological liers jobs for life, like making them economic "experts" and MSM pundits, so they can lie for their the profit of all of them - liers AND grifters.
    The rest of us remain screwed.

    Yes,

  • Varecia on August 24, 2012 10:45 AM:

    cund gulag: "...I know unbridled inflation is bad, I know full well from living in the late 70's to mid 80's - but wouldn't a small rate of inflation actually be HELPFUL right about now?..."

    And while I was a minor during most of that time, I do recall that rigid efforts at holding down inflation (via wage & price freezes) were a bit of a disaster for Carter.

  • Mimi on August 24, 2012 11:07 AM:

    It is quite interesting that Bernanke might have brought his job loss on himself. I am still hopeful that Obama will prevail in November, but if he loses one factor will be that the Fed never used its power to improve the unemployment rate. As conservative as Bernanke's monetary policy has been, it has still not been as conservative as the wingnuts would like it.

  • Rick B on August 24, 2012 11:27 AM:

    @c u n d gulag 10:14 AM

    You understand too clearly. The power masters do not want people to understand as clearly as you do. We definitely need a little inflation right now. Yes, it would kick start the sluggish economy and more than pay for itself, though it would have to be stopped before a lot of people would be happy about. Clearly Mitch McConnell and the Republicans cannot allow that stimulus to happen as long as the Black African Muslim Usurper is occupying the office of President. They cannot let the Democrats improve the economy if they are to gain national power.

    The other big 'problem' with borrowing for free to pay for the stimulus is that any predictable inflation would increase the interest rate to above the zero level. That zero rate is currently being taken advantage of by the large banks so they can get unearned and sizable profits. They aren't lending to businesses, so that trading is their main profit. You may have noticed that much of the money flowing to support Republicans comes from bankers and investors who gain a great deal through the current effective zero interest rate.

    Yes, money borrowed at the current free rate to pay for a large stimulus would also limit how much longer the bankers and investors can get that same free interest rate, and the bankers and the investors have a veto on spending for the stimulus. I mean who would get the advantage of the stimulus? All the rest of us, of course, and we are dirt under the bankers and Republican politician's feet. Since the bankers, investors and Republican politicians have the veto power on the stimulus we aren't going to get it. The "wrong people" would get the advantages.

    Economics is not a science. It is a mathematical gloss over partisan politics that is mostly under the control of bankers and investors. They buy politicians to maintain their control of the system. One of the largest propaganda efforts in the world is the requirement to make students take economics courses designed to justify the shift of power to the money classes. Much of what is taught is designed to keep economic and political power where the current wielders of power want it to remain.

  • Legitimate Unemployment on August 24, 2012 2:30 PM:

    Obsessing over one evil while being dismissive of others? I'm seeing a pattern here.

  • Peter C on August 24, 2012 4:46 PM:

    Rich people benefit from unemployment; it keeps labor costs down.

    Rich people hate inflation; it saps the value of their investments.

    Rich people have most of the money already; they don't want the FED printing more. It's such a BOTHER to go out and collect the new stuff.

    Everything Romney wants primarily benefits HIM.