Wikinvest Wire

Paul Ryan wants sound money

Monday, March 02, 2009

There it is again on the back page of the WSJ op-ed section - another pitch for sound money. Representative Paul Ryan (R-Wisconsin), whose name is nearly an anagram for Representative Ron Paul (R-Texas), thinks that money may be at the root of our problems.

Guarantee sound money. For the last decade, the Federal Reserve's easy-money policy has helped fuel the housing bubble that precipitated our current crisis. We need to return to a sound money policy. That would end uncertainty, help keep interest rates down, and increase the confidence entrepreneurs and investors need to take the risks required for future growth.

I believe the best way to guarantee sound money is to use an explicit, market-based price guide, such as a basket of commodities, in setting monetary policy. A more politically realistic path to price stability would be for the Fed to explicitly embrace inflation targeting.

Transcripts from recent meetings of the Federal Open Market Committee meetings suggest that the Fed may already be moving in this direction. This would be an improvement over the status quo: It could help combat near-term deflation concerns while also calming the market's longer-term inflation fears.
This was part two of a four part plan to fix things and, yes, tax cuts were numero uno (he is a Republican after all).

The inflation-targeting would work particularly well over the next few months, supplying cover for the central bank to push the printing presses even harder. However, over the longer term, as currently constructed, it would just foster more asset bubbles.

As for the "commodity basket" approach, it's not clear how this would work if and/or when financial markets and the economy regain some sense of normalcy. It's hard to imagine how, in any sort of "stagflation" scenario, the Fed would be raising rates or contracting the money supply with economic growth still sluggish.

3 comments:

Anonymous said...

so the gentiles talk and discuss and we laugh. let them say what they want. we control the money system. we control your money system , little man. your works mean nothing. we have the power. we have most of the money. right now we are stealing the money that the baby boomers saved for the last 50 years or so of work. we are destroying your country. we are destroying your economy. we are destroying your military. you fools. go ahead and discuss. go ahead and talk. it all means nothing. we have the money and the power and your words mean nothing to us.....

little larry sellers said...

I just did a quick Google search on Ryan and found very little information. Since I'd never heard of him before, I wanted to see how long he's been fighting the good fight.

I hope he's not another cookie cutter Republican politician who wants to pretend that all our troubles started on January 20th of this year. Funny how a lot of people riding Santelli's "tea party" coattails thought the world was a wonderful place until six weeks ago.

Mark Herpel said...

There are still 5 states with pending honest money legislation. We have devoted an entire issue to it this month on DGC Magazine

Mark

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