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The Surprising Rise Of Hard Money Populism

There’s something new going on in Washington, DC.

Senate Committee on Banking Housing and Urban Affairs hearing during which Federal Reserve Board Chairman Ben Bernanke delivers second semi-annual report on monetary policy.
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Senate Committee on Banking Housing and Urban Affairs hearing during which Federal Reserve Board Chairman Ben Bernanke delivers second semi-annual report on monetary policy.

Under the usual rules of the politics of money, high unemployment results in criticism of the Federal Reserve from the left. The Fed is usually accused of having a monetary policy of being too tight when unemployment creates political waves.

The critics have traditionally been Democrats—such as banking committee chairs Wright Patman in the late 1960s or Henry Gonzalez in the early 1990s.

But monetary policy beyond the zero-boundary at a time of high unemployment has sparked off a tidal wave of criticism coming mainly from the right. On Monday we had the open letter to Ben Bernankefrom a mostly conservative and Republican affiliated group calling for the Fed to stop its latest quantitative easing program.

Today, two Republican lawmakers will hold a press conference announcing their support for a bill to end the dual mandate of the Fed, which requires the Fed to seek maximum employment and price stability. They would have the Fed focus solely on fighting inflation.

Prices of consumer goods, however, are not rising rapidly. Unemployment is high.

So what’s going on?

I think, for perhaps the first time in generations, the political machinery of the United States may be standing up to defend sound money. Why would this happen now? One reason might be the aging population of the US. The elderly often rely on their savings and fixed-incomes from bonds. When interest rates drop too low, it becomes difficult to live on bonds. Runaway inflation could wipe out the value of savings.

In short, the surprising shift in monetary politics might simply reflect the aging of America.

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