Krugman’s Tea Party?

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The New York Sun

“You sometimes hear claims that the Tea Party is as opposed to bailing out bankers as it is to aiding the poor, but there’s no sign that this alleged hostility to Wall Street is having any influence at all on Republican priorities.”

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That’s how the Nobel laureate Paul Krugman reacts to the budget bill. He’s unhappy with a measure that has rolled back a rule “barring,” as Mr. Krugman puts it, “insured institutions from dealing in exotic securities, the kind that played such a big role in the financial crisis.” He reckons this “isn’t the death of financial reform.” But, he says: “You should be against letting Wall Street play games with government-guaranteed funds. What just went down isn’t about free-market economics; it’s pure crony capitalism.” On this, he reckons, “both sides of the ideological divide should agree.”

We’re tempted to predict that Mr. Krugman will be marching to the barricades with Sarah Palin and the Tea Party. But we doubt it. It’s not our purpose to suggest that he’s a pantywaist. The real problem is that the Tea Party is ahead of him. The way to beat the problem of Wall Street and the banks playing with taxpayer provided money is not a game of regulatory whack-a-mole, which is what, say, Senator Warren wants. The way to stop this raid on the taxpayers is through the restoration of a sound, stable dollar tied by law to a specified amount of gold.

Nor is it clear to us that the powers that be in the Republican Party are so oblivious to this question. The bill just passed is a product of a lame duck legislature. The Republicans who will lead the next Congress, the 114th, are well aware of the strategic moment in respect of monetary reform. These leaders include Paul Ryan, who so pointedly questioned Chairman Bernanke of the Federal Reserve on the issue of gold. They include the chairman of the House Financial Services Committee, Jeb Hensarling, who is looking at a rules requirement for the Fed.

This is a party whose last presidential platform, the one on which Governor Romney was supposed to stand, included a plank on monetary reform. It emerged from a fierce primary. Said it: “President Reagan, shortly after his inauguration, established a commission to consider the feasibility of a metallic basis for U.S. currency. The commission advised against such a move. Now three decades later, as we face the task of cleaning up the wreckage of the current Administration’s policies, we propose a similar commission to investigate possible ways to set a fixed value for the dollar.”

That plank was constructed at a time when the value of the dollar was in a free-fall, having collapsed less than a 1,600th of an ounce of gold. It has gained some value since then but still is below a 1,200th of an ounce of gold, off more than 28% from the value of the dollar when President Obama acceded to the White House and 77% since President George W. Bush took office. All this debasement of the dollar has failed to solve anything — or slake the appetite of Wall Street and the banks for an ever greater condominium with the government. Which has produced this odd situation in which Mr. Krugman looks less like a radical than a man without a party.


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