Texas governor Rick Perry drew criticism recently for suggesting that any attempt by Federal Reserve chairman Ben Bernanke to print money before the 2012 election would be treasonous. Much of the criticism surrounded his use of the word “treason,” but I was puzzled by the conundrum implicit in his statement. The idea that Bernanke would be playing politics by printing money between now and the next presidential election suggests that doing so would improve short-term economic growth and improve President Obama’s reelection prospects. However, if a more expansionary monetary policy would help the economy, why would anyone oppose such a policy, let alone call it treason?
Perry’s comments reflect a larger problem with respect to views about monetary policy. Some market commentators seem to be just as certain of a significant increase in inflation in the near- to medium-term as others are that there is a need for a third round of “quantitative easing.” This disparity has much to do with how the Fed operates. Indeed, the widespread disagreement and uncertainty about monetary policy presents an opportunity for Republican presidential candidates to argue for significant reform.
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