Money Bawl

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National Review:

 

Ramesh Ponnuru

When the Federal Reserve decided to loosen monetary policy in September 2007, not many people criticized it. The vote was unanimous. Few congressmen said anything about the move. Three years later, inflation was lower and unemployment higher than in 2007. But the Fed’s move to loosen money in mid-2010 aroused fierce opposition from conservative politicians, economists, and journalists. Sarah Palin complained that “printing money out of thin air” would “erode the value of our incomes and our savings.”

Republicans and conservatives have started to take a much harder line against inflation and a Federal Reserve they consider too inclined toward monetary expansion. In the early 1980s, supply-siders would sometimes criticize Paul Volcker’s Fed for fighting inflation too vigorously. Few on the right say anything similar today.

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This rapid shift in positions has several causes. The view that overly loose Fed policy contributed to the housing bubble of the last decade became the conventional wisdom. The massive expansion of the money supply in the wake of the financial crisis alarmed many observers. But the shift in position was also a testament to Representative Ron Paul’s dogged campaign against the Fed and its allegedly inflationary ways, and for a gold standard. If not for the Texas Republican — who has long been the congressman most interested in monetary policy, and now chairs the subcommittee with jurisdiction over it — it is hard to imagine that Newt Gingrich would have proposed a new commission to examine the gold standard, or accused Fed chairman Ben Bernanke of being “the most inflationary, dangerous, and power-centered chairman of the Fed in the history of the Fed.”