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Politics, Populism, and Monetary Policy

My colleague John Carney wrote a piece yesterdayabout the politics of American monetary policy.

Carney's basic assertion is this: A major sea change—if not an outright reversal—has occurred in the political alignment between left and right on basic issues of inflation, unemployment, and monetary intervention.

He's looking at the issue over a 40+ year time horizon:

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

Carney's piece takes what I believe to be a fascinating tack—and got me thinking about the issues involved in an even more expansive sense.

In 2004, Thomas Frank wrote about just such a pervasive and durable realignment in American politics in his book "What's the Matter with Kansas? How Conservatives Won the Heart of America."

Perhaps not surprisingly, the book divided opinions principally along partisan lines—with its detractors dismissing the book as little more than an anti-capitalist screed.

Some saw the essential premise of the book to be a highly tendentious left-wing assertion that conservative hucksters had hijacked reactionary social positions in order to convince Middle America to vote for economic policies favorable to big business—despite those policies being detrimental to the economic realities facing average Americans.

Even The New York Times ran a review, by Josh Chafetz, that many readers would be likely to describe as rather critical.

(For example: In an object lesson presumably intended to demonstrate how—in the absence of moderation and good will—extremes meet, Chafets uses the first sentence of his review to compare author Thomas Rich to "the most vitriolic of right-wing pundits"—"Ann Coulter")

Chafetz characterizes Rich's position as asserting, in part, that "…those [conservative] leaders have cynically seized upon and promoted a sense of cultural grievance and victimhood in order to win over the bumpkins and fool them into voting against their true interests."

Pretty strong words indeed.

But whichever side of the issue you naturally incline toward, it seems fair to remark that there have been significant and substantive policy shifts, broadly speaking, relative to the alignment of left and right in American politics over the timeframe Carney refers to in yesterday's blog post.

And perhaps the most conspicuous realignment—or diametric reversal—among them is the recent populist espousal of a "sound money" policy as fundamental to the liberty of the common man.

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