Paul Ryan’s Nutty Views on Monetary Policy

I don’t understand why someone with such a clownish views is lauded as a policy wonk:

What did Ayn Rand teach Paul Ryan about monetary policy?, by Brad Plumer: In 2005, Paul Ryan explained that he often looks to Ayn Rand’s novel “Atlas Shrugged” as inspiration for his views on monetary policy. “I always go back to, you know, Francisco d’Anconia’s speech, at Bill Taggart’s wedding, on money when I think about monetary policy,” he said in a speech at the Atlas Society. So what are Ryan’s views on this front? And what do they have to do with Ayn Rand? …

Paul Ryan … comes at monetary policy from a fairly non-mainstream perspective … Perhaps Ryan’s most unconventional opinion on monetary policy came in the summer of 2010, when he told Ezra Klein that the Federal Reserve should actually raise interest rates even as the U.S. economy was still struggling: “[T]here’s a lot of capital parked out there, and we need to coax it out into the markets,” he said. “I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.”

That’s not a common view. Most economists tend to think that raising interest rates will slow the economy down. …

Yet Ryan has been consistent in his view that the Fed should do whatever it takes to fight inflation — and stop trying to bring down the unemployment rate. In 2008, Ryan sponsored a bill that would repeal the Federal Reserve’s “dual mandate” to tackle both inflation and high unemployment. Instead, under his bill, the Fed would focus only on “price stability.” …

As an alternative approach, Ryan has suggested that the United States should return to “sound money” by anchoring the value of the dollar to, say, the price of a basket of commodities. This isn’t quite a return to the now-abandoned gold standard, but it’s a roughly similar concept. …

So what does any of this have to do with Ayn Rand? Over at Slate, Dave Weigel has a longer explanation of the parallels between Ryan’s monetary policy and “Atlas Shrugged.” … “I hope it doesn’t surprise you that Ryan, since at least 2008, has wanted the Fed to abandon the employment mandate. He doesn’t say this in a stupid way, like Rick Perry. He says it by citing Ayn Rand.”

[See Brad DeLong too: Reflections on Paul Ryan’s Transactions in Individual Bank Stocks in 2008.]

Romney and Ryan don’t approve of fiscal policy stimulus (unless it’s tax cuts for the wealthy), and Ryan would take away the ability of the Fed to respond to unemployment as well. Basically, they are telling us that if a recession hits and they have their way, nothing will be done. Not a thing. No fiscal policy response (except perhaps austerity to make it worse), and no monetary response (except, if Ryan has his way, interest rate increases based upon a misunderstanding of how the economy works — that would also make things worse). So it wouldn’t just be the “you’re on your ownership society” of Randian dreams, Ryan would have monetary and fiscal authorities making things even worse than they already are.

Ryan is not a well-informed policy wonk with new, exciting ideas. He’s a policy idiot. Don’t let this guy anywhere near the policy levers.

This post was originally published at Economist’s View and is reproduced here with permission.

4 Responses to "Paul Ryan’s Nutty Views on Monetary Policy"

  1. Joe Bohrer   August 14, 2012 at 5:28 pm

    I would say the clownish views are yours. You think lower rates are stimulating growth? And what evidence would there be of that?

  2. True North   August 14, 2012 at 8:58 pm

    A substantive reason for having central banks solely mandated for price stability is the behavioural effect it can force on political and government policy makers. If the only tool central banks can bring to the table is swingingly high interest rates, policy makers might be quicker to use corrective fiscal policies rather than evading decisions and passing them off to a central bank. The hugely high interest rates of the early 1980s did force some countries to march down different fiscal paths over a period of years and bitter political discourse: some in Asia, Canada, and Australia as examples.

  3. spider   August 16, 2012 at 11:20 am

    Ryan's views are no nuttier than "mainstream progressive" views.

    Ryan represents traditional white America. They see the country declining badly and want to return it to its period of dominance. To the 1950s, or 1920s, or 1880s and they think they can do so by returning to the policies of those times.

    Meanwhile Krugman wants to return to dynamic growth of the Clinton years, or those Eisenhower, and he thinks Keynesian economics will do the trick. As if there were no environmental crisis, no energy crisis, no overpopulation crisis, no rise in the consciousness and power of the third world.

    So who's nuttier?

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