Welcoming Paul Krugman

Well what do you know. Paul Krugman has finally swung over to the position that monetary policy ought to be a “major issue in the 2016 campaign.” These columns have carried more than 130 editorials to that effect in the last decade alone (a book of them is about to be issued, but more soon). So let us just say that Mr. Krugman is most welcome aboard this merry bandwagon.Mr. Krugman, of course, doesn’t have quite the same view of money that we do. He reckons that “the emerging G.O.P. consensus on money is crazy — full-on conspiracy-theory crazy.” The Nobel laureate asserts that the “most obvious manifestation of money madness” is the campaign by Senator Rand Paul for an audit of the Federal Reserve. The Sun, insofar as we’re aware, was the first newspaper to endorse a Fed audit, first advanced by Senator Paul’s father, Ron Paul.The measure may be nuts in Mr. Krugman’s view. But his column would have been more journalistic had he noted that Audit the Fed has passed the House twice. Both times it passed by much more than a “G.O.P. consensus.” In September — that is, a few months ago — it passed by a vote of 333 to 92. It turns out 106 Democrats voted for the measure. It was blocked in the Senate by Harry Reid, which may be one reason why in November the Democrats lost control of the upper chamber.That earthquake has thrown the inflation camp into a panic. Mr. Krugman has written almost as many columns calling for inflation as we’ve written editorials calling for honest money. We tend to focus less on the consumer price index than on the value of the dollar in constitutional specie, silver or, even better, gold. By the latter, Federal Reserve-issued scrip has lost more than 78% of its value just since George W. Bush acceded to the presidency.Mr. Krugman mocks the idea that there is any moral dimension in respect of markets and money. In the conservatives’ worldview, Mr. Krugman reckons, money “consisting of pieces of paper or their digital equivalent that are issued by the Fed, not created by the heroic efforts of entrepreneurs” is “an affront.” That’s the only thing he got right. He has never felt so liberated as when President Nixon closed the gold window, ended Bretton Woods, and ushered the nation into the age of fiat money.At that point, in Mr. Krugman’s reckoning, all would be manageable. But how has it worked out? How does it work? What is the Federal Reserve doing now that it has been liberated from sound money? These are the questions that Senator Rand Paul, Congressman Paul Ryan, and so many others want answered. Congress is fermenting over the Federal Reserve; the chairman of the Joint Economic Committee, Kevin Brady, has been pressing for a Centennial Monetary Commission to take a look at the first century of the Federal Reserve; he also wants to end the Fed’s dual mandate so it need not focus on jobs as well as its original assignment, a stable dollar.Nor is it just the Republicans. No less titanic a figure than Paul Volcker, elevated to the Fed chairmanship by President Carter, gave a speech in May to the Bretton Woods Committee in which he said: “By now I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success. In fact, international financial crises seem at least as frequent and more destructive in impeding economic stability and growth.”So let’s have that monetary debate in the 2016 campaign. Let’s hope it is carried out on a higher plane than the last time sound money was at the center of a presidential campaign. That was in 1896, when William McKinley, stood for sound money against William Jennings Bryan, who mounted on behalf of inflation one of the most demagogic presidential campaigns in American history. There’s been a lot of water — and wealth — under the bridge since then, and it’s past due to bring these questions to the voters for a new time.

Welcoming Paul Krugman

Welcoming Paul Krugman

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