Democracy in America

Fundamentalism, whether it's religious or political, is always backward-looking, stifling and counterproductive to progress. It insists that things never change, except to go back to what they used to be, and no allowance can ever be made for anything in the current time being different than at some idealized golden time in the past.

And then, of course, is the fact Mr. Ryan was also no doubt grandstanding for the Tea Party, Glenn Beck, gold-bug crowd he hopes to woo in 2016.

Speaking of simplistic models, and of how it is the increased worldwide demand that is driving up prices of food and commodities, please tell me how could there be a rise in the overall price level in the absence of fiat money creation? Because if the FED wasn't there printing money and the money supply was constant, a rise in the price of one item would necessarily lead to the drop in the price of another. Of course, the velocity of money also matters.

Now if you are going to say that printing money is necessary or that it is a good thing, that's another matter. But don't say that the FED and the other central banks are not the ultimate sources of world inflation.

Actually, what Ryan also stated was as follows:
“Endless borrowing is not a strategy,” he said. “My concern is that the costs of the Fed’s current monetary policy – the money creation and massive balance sheet expansion – will come to outweigh the perceived short-term benefits.”

How is that a dogmatic insistence on hard money policy?

Yes, yes, Economist: Conveniently missing from your blog is the exchange that took place between Ryan and Bernanke regarding fiscal policy and deficit spending.
Excerpt:
Ryan: “Just to summarize, you do believe that one of the best things we can do for short-term economic growth is to put out a plan that actually stabilizes our fiscal picture, that actually gets our liabilities under control, and shows, with confidence, that we have the right trajectory because we’ve addressed the programs — which are spending programs — that are getting us out of control. Is that the case?”
Bernanke: “That’s correct.”

'Republicanomics' is apparently so misguided and delusional that the Fed Chairman cannot help but agree.
Once again, the Economist can't help demagogueing Republicans and policies that tend to shrink big government; calling for restraint by the Fed and Congress is heresy, but spending over 4 billion dollars of money the government doesn't have every day? Meh.

Sounds like a 180 from the Reagan day.

Back under Reagan's first years we had:
1) tight money - Volker & rates
2) loose fiscal - Reagan and Dems spending

Today might have:
1) loose money - QE1, QE2
2) tight fiscal - under the Tea Party wing and Republicans, depending on how they negotiate the CR extension and the raising of the Debt Ceiling. Then they get work on the FY12 budget.

Regards

The stupidity is the fact that the recession was a result of tight money. Which was the point: a few years of lost output in exchange for decades of monetary peace. That wasn't how it was sold, of course, but what politician these days would have the guts to even contemplate such difficult trade-offs?

Good post, but I do think that when talking about Reagan it's necessary to recognize that while in actual practice he was quite pragmatic (and I generally like his actual policies as a reaction to the specific times he was in, the massive increase in defense spending excepted, though I understand why it was a plausible course of action given the available information at the time) his rhetoric tended towards being a bit more absolute than his actions (or at least how it is reported today, the whole Reagan on Medicare thing being the strongest example).

So while his record is quite strong, there isn't as much separation between the modern Republicans and Reagan as it is sometimes made to sound like. In many cases, it seems to be a case of the Republicans doing what Reagan said, not what he did. I personally think they'd be better off doing the opposite but I lost all allegiance to the party years ago. While I haven't looked at the history in detail, and am too young to remember it, my impression has always been that he never portrayed his policies as a narrow response to current conditions but instead portrayed it in pretty essentialist terms, especially by contrasting America with the Soviet Union. It always seemed to me that he tried to make an identification between his policies and the American way, as opposed to the Soviet, which helps to explain why the Republicans today so strongly identify with his rhetoric, if not always with his actions.

Also, as far as strong dollar policies go, I do have to note that Reagan oversaw the Plaza Accord which was essentially a very strong managed depreciation of the dollar, which was a form of currency debasement. Though I'd be surprised if the rhetoric matched with this (though I really don't know about the rhetoric).

Also, the expansion of the deficit under Reagan is something that can't be easily dismissed. His economic program bears responsibility for this, even if GHW tried to correct for its excesses.

"...even from sober, economically-literate Republicans such as Mr Ryan."

I believe one of the points of this article, and other similar recentl posts about Mr. Ryan, is how -

Even though he is touted as the Republican party's Mr. Economics, it reality he doesn't know much about it.

I don't find Mr. Ryan's concerns to be out of step with many business people I meet on a daily basis. They aren't led by pundits. They're being led by their memories of the 70's, Carter, and Reagan. It's inconceivable to many people that anything other than inflation can occur. Interest rates will go to 16%. Most of these people have one thing in common. They're old.

It's seldom mentioned, but the baby-boom generation still has a crazy amount of influence on the national dialogue. For many of our debates the boomer experience remains a huge influence, but their past experience is not the only possible outcome and not the only one worth guarding against. They do vote though, and Ryan even if he may know better -- big if -- he's playing to a very receptive audience.

Oo Oo Oo The Economist has written a "PROMPED REFUTE", I'll take the attention, me me me.

insidious

1. intended to entrap or beguile: an insidious plan.
2. stealthily treacherous or deceitful: an insidious enemy.
3. operating or proceeding in an inconspicuous or seemingly harmless way but actually with grave effect: an insidious disease.

"Our currency should provide a reliable store of value—it should be guided by the rule of law, not the rule of men," Mr Ryan informed Mr Bernanke. "There is nothing more insidious that a country can do to its citizens than debase its currency". And who would disagree?

I agree with the first half of the statement, the currency should be guided by written agreed rules, as opposed to created as a reaction to working men's behavior. However since that's my conclusion about the first half of this statment, government isn't being insidious about it's currency discussions, by debasing it or otherwise, since government can't really help organize the currency or damage the organization of the currency -the currency isn't run by presented discussed rules. Government has simply few options about the currency accepting various methods for expanding the currency, based on human classing and their demand for pensions (worker) or to provide pensions (employer).

The currency internally to the united states and globally, as a global financial system seems to function, simply expands, based on global working options.

I might really be the person talking for the global financial system, which I find disturbing, but what I find more disturbing is the only group that can communicate they agree with me about changing from paper currency to legal and electronic currency; and the group that agrees with me is the "mexican drug cartel".

Great the other people talking properly about changing the global currency is the mexican drug cartel, my observation gives me an un-due depression and feeling of extreamism.

Kristina Brooker, Newfoundland, 126 395 086
"The number one rank (error implied) consumer."

The least expanded currency with the highest potential to expand.

insidious would imply that those getting paid to discuss the currency can make responsible decisions.

I don't find the function of printing currency to be guided by policy.

This is a seismic shift in the GOP. A large minority of Republicans also voted against renewing the Patriot Act. Even the Republicans who voted for it, did so with reservations. During one of the 2008 Republican presidential debates, one of the questions to Ron Paul was "What are you doing here?" Now it looks like his ideas are dominating the party. Nobody expects Congress to direct monetary policy. But maybe this Tea Party can do something on the fiscal side. They seem more willing than traditional Republicans to cut defense.

Djyrn

I agree with you on the boomers, but would argue that the boomers' and the generation retired right now are very often talked about as the root of many of the bizarre policies being pushed right now. It is just not talked about by politicians at all and not as much as is should be, except in code, by journalists working for papers that only the older generations still pay money for.

This is because the poor are mostly too demoralized to, and working people have no time to, vote in elections scheduled on working days. If you are retired though, and can do addition and subtraction, and want to keep the government's hands off SS and Medicare, then you get your keister out and vote.

So you get the Republicans' current bright idea of turning the US government into an enormously, breathtakingly, heavily armed healthcare and pension fund.

The Economist is kind to Mr. Ryan. While appearing knowledgeable, it is clear his mumbo jumbo is nonsense. The goal is to privatize everything and deregulate. The winners, Wall St, Fortune 500 and the rich.

Lots of Ryan's economic policy is ridiculous supply-side economics that Reagen never even dreamed of (e.g., low flat tax on income, no capital gains tax, no corporate tax) or ideas that were so poorly underdeveloped that you don't know what they really meant especially on healthcare (e.g., vagaries about 'minimum benefit plan' and some type of subsidies for the poor with no real numbers).

I actually tend to agree with Ryan here though. Basically, what he is saying is why is the Fed taking on a policy that has fairly limited upside (at most 0.5% GDP boost this year according to most economists) with some really potentially medium/long-term negative effects that will dwarf the minimal short-term boost in consumption.

WOW! An unexpected burst of rational writing. Thank you.

I'm a Wisconsin resident. We know Ryan. Ryan loves attention just like Sarah, Glen, and Rush. He's just a little less stale.

Being a CHEESEHEAD doesn't mean you possess special insight... it just means you're home to a great (American) football team!

@doublehelix

this post wasn't about fiscal policy, it was about monetary policy. Your quote is fine - who doesn't like the idea of *eventually* balancing the budget (Ryan says "on the right trajectory")? But it doesn't have anything to do with whether or not we are causing inflation through the Fed's creation of money in QE1 and QE2.

The attitude in your reply here - that of falling back on rhetorical posturing intended to promote your ideology rather than assessing any of the actual economic facts at issue - is quintessential republicanomics. The fact is that the US is still on the edge of a deflationary spiral (employment down, wages flat to down) and inflatation in commodity prices in China has vastly more to do with that country's rising demand for raw materials.

Actually I thought Volker pursued a tight money policy that commenced prior to Reagan's administration, and persisted against the Reagan administrations wishes (Source: Hedrick Smith's Power Game, or whatever the book was called discussing Washington and Federal policy making).

Reagan had a tight money stance, although I can't recall anyone pushing for a return to the gold standard. However, we had huge tax cuts without any compensating spending cuts, accompanied by an uplift in defense spending. So, dollars were getting pumped into the economy.

Probably we were helped by the collapse of energy prices. By the way, that probably represented a significant, one-off affair that we cannot count on again, unless we think it is a good idea to push interest rates into the double digits.

doublehelix,

First, Mr.Ryan offering more reasonable words on fiscal policies doesn't negate his dogmatic adherence to Republican monetary policy.

Secondly, those more reasonable words are just that - words. Of course, anyone with a calculator and the ability to use it can tell you that to solve the current U.S. debt problems, big spending programs, namely Medicare, military spending and to a lesser extent Social Security, will need to be tackled and brought under control. But Republicans took cuts to those programs largely off the table in their spending reduction plans. They've shouted against cuts to both Medicare and the military when proposed by Democrats.

This fiscal side of "Republicanomics" you present as described by Ryan and supported by Bernanke is quite reasonable. It's just being implemented by Democrats.