Something that makes Paul Ryan an interesting figure in my view is that along with his passion for reducing the living standards of the poor in order to bolster the incomes of the wealthy, he maintains a sideline interest in monetary policy. So Page 5 of his latest budget warns that on the current path “pressed for cash, the government will take the easy way out: It will crank up the printing presses. The final stage of this intergenerational theft will be the debasement of our currency. Government will cheat us of our just rewards.”
It’s a telling discourse thanks to the deeply moralized and essentially nonsensical terms in which he frames the question of inflation. Is any increase in the measured consumer price index a form of debasement and cheating? Is today’s close-to-but-below 2 percent sacrosanct? Would the 4 percent of the Reagan-Volcker years be acceptable?
Later he says that “we’re enjoying historically low interest rates because the Federal Reserve is buying large amounts of our debt, and investors have retreated to U.S. securities amid global turmoil.” Ben Bernanke says this is mistaken, and if Ryan wants to prove Bernanke wrong the question he has to answer is, why are interest rates so low in other sovereign, currency-issuing countries? We’ve got low rates today in Sweden and Norway and Canada and the United Kingdon and Switzerland. We’ve got low rates in Germany and France. Is that because investors are retreating to Swedish securities amid global turmoil? Because Mark Carney was debasing the looney? How about Japan? My vote is to agree with Bernanke that low rates for rich democracies who’ve retained currency sovereignty primarily reflects fundamental factors and not the particulars of Federal Reserve policy.