Wednesday, August 17, 2011
I find the focus in this post by Scott Sumner pedantic in the extreme. We all acknowledge that almost no one (including most distinguished economists) is qualified to talk monetary policy, so focusing on the language rather than the practicalities seems very odd.
To me, it breaks down quite simply.
The language people like Perry and Stockman have used to describe the problem is all wrong and results from not really knowing monetary economics. However, they see the problem quite well; Contractionary and bordering on corrupt monetary policy run for the apparent benefit of big finance, conducted with complicity of a spendthrift federal government administration in the face of persistent high unemployment and crummy private sector business conditions.
The other side of the political divide is certainly more sophisticated. They have the language to describe the problem, but their years in power have demonstrated they fundamentally do not understand it or have other priorities and will do nothing about it.
Historically, changing monetary regimes has never been a sophisticated and technical process. It's probably the biggest factor underlying many, if not most of America's populist upheavals. There's passion, yelling, lots of anger, and rarely does the popular debate inform us of what's actually happened. That's just the way it is, and it sucks. Except it sucks less than the alternative of some sort of technocratic authority, which is what's pretty much gotten us into this mess. Scott's solution offers a way out that addresses the concerns of the populists, but is fundamentally antithetical to the technocrats.
I mean, seriously, can anyone picture Mitt Romney hammering the Fed and telling the banks that they're no longer going to get a free lunch in the form of IOR? My ass he's gonna do that, and Obama clearly isn't.
Will Perry? I have plenty of doubts, but simply by tough criticism he changes the game somewhat, when the political process has been deferential for probably three years too long.