G.O.P. Monetary Madness

From The New York Times: http://www.nytimes.com/2011/12/16/opinion/gop-monetary-madness.html

By PAUL KRUGMAN

Published: December 15, 2011

Apparently the desperate search of Republicans for someone they can nominate not named Willard M. Romney continues. New polls suggest that in Iowa, at least, we have already passed peak Gingrich. Next up: Representative Ron Paul.

In a way, that makes sense. Mr. Romney isn’t trusted because he’s seen as someone who cynically takes whatever positions he thinks will advance his career — a charge that sticks because it’s true. Mr. Paul, by contrast, has been highly consistent. I bet you won’t find video clips from a few years back in which he says the opposite of what he’s saying now.

Unfortunately, Mr. Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness. And, even more unfortunately, Paulist ideology now dominates a Republican Party that used to know better.

I’m not talking here about Mr. Paul’s antiwar views or his less well-known views on civil and reproductive rights, which would horrify liberals who think of him as a good guy. I’m talking, instead, about his views on economics.

Mr. Paul identifies himself as a believer in “Austrian” economics — a doctrine that it goes without saying rejects John Maynard Keynes but is almost equally vehement in rejecting the ideas of Milton Friedman. For Austrians see “fiat money,” money that is just printed without being backed by gold, as the root of all economic evil, which means that they fiercely oppose the kind of monetary expansion Friedman claimed could have prevented the Great Depression — and which was actually carried out by Ben Bernanke this time around.

O.K., a brief digression: the Federal Reserve doesn’t actually print money (the Treasury does that). But the Fed does control the “monetary base,” the sum of bank reserves and currency in circulation. So when people talk about Mr. Bernanke printing money, what they really mean is that the Fed expanded the monetary base.

Continue reading at: http://www.nytimes.com/2011/12/16/opinion/gop-monetary-madness.html