market monetarism

Tony Yates on market monetarism by Scott Sumner

Understanding the Crank Epidemic by Krugman

James Pethokoukis and Ramesh Ponnuru are frustrated. They’ve been trying to convert Republicans to market monetarism, but the right’s favorite intellectuals keep turning to cranks peddling conspiracy theories about inflation. Three years ago it was Niall Ferguson, citing a bogus source. Ferguson was widely ridiculed, by moderate conservatives as well as liberals — but here comes Amity Shlaes, making the same argument and citing the same source. The “reform conservatives” have made no headway at all. 

Why this lack of progress? 

The answer is that inflation paranoia isn’t a simple misunderstanding that can be corrected by pointing to evidence. It’s deeply embedded in the modern conservative psyche. Government action must, by definition, have disastrous results; and whatever market monetarists may try to say, their political comrades will continue to lump monetary policy in with fiscal stimulus and Obamacare. And fiat money can’t work — Francisco D’Anconia said so, and it must be true. So it’s always the 70s, if not Weimar, and if the numbers say otherwise, they must be cooked. Evidence has a well-known liberal bias. 

Even the rare conservative willing to admit that we don’t yet have high inflation won’t admit that this suggests something wrong with models that predicted a huge inflation surge. No, it’s just a miracle. 

So market monetarism isn’t going anywhere, politically. It was conspicuously absent in the Eric Cantor-sponsored book of supposed new ideas — and Cantor himself was knocked out of Congress by a faith-based Randite (which doesn’t make sense, but sense also has a well-known liberal bias.) 

Sorry, guys, but you have no home.

 And he doesn't mention Taylor's push to end the Fed's independence.