The GOP’s Hard-Money Orthodoxy

Paul Krugman comments on what he sees as something relatively new on the GOP policy front: “an increasingly unified Republican demand for hard-money policies, even in a depressed economy.”

“Republicans have turned their back on [Milton] Friedman, whether they know it or not, and draw their monetary doctrine from ‘Austrian’ economists like Friedrich Hayek … when they aren’t turning directly to Ayn Rand.”

“This turn wasn’t driven by experience. The new Republican monetary orthodoxy has already failed the reality test with flying colors: that ‘debased’ dollar has risen 30 percent against other major currencies since 2011, while inflation has stayed low … But years of predictive failure haven’t stopped the orthodoxy from tightening its grip on the party. What’s going on?”

“My main answer would be that the Friedman compromise — trash-talking government activism in general, but asserting that monetary policy is different — has proved politically unsustainable. You can’t, in the long run, keep telling your base that government bureaucrats are invariably incompetent, evil or both, then say that the Fed, which is, when all is said and done, basically a government agency run by bureaucrats, should be left free to print money as it sees fit.”

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