Ryan’s Monetary Radicalism

by Gwynn Guilford

Forget Ryan's fiscal irresponsibility for the moment – his monetary policies are just as foolhardy, if not more so. Dylan Matthews looks back:

In 2008, Ryan sponsored a bill repealing the requirement that the Federal Reserve act to reduce unemployment, and specifying that it should determine a specific definition of “price stability” and then act to promote that.

Matthews is referring to the Fed's dual mandate – it is responsible for addressing both inflation and unemployment. Ryan's bill would have made the Fed unauthorized to inject money into the economy to stimulate growth. In practice, this would mean that another round of quantitative easing – such as what the Fed will hopefully embrace in September – would be impossible. Brad Plumer explains exactly how radical Ryan's monetary views are:

Ryan has roundly criticized Bernanke’s efforts to stimulate the U.S. economy by buying up assets and injecting money into the economy. For instance, one way the Fed’s efforts are thought to work is by reducing the value of the dollar, helping U.S. exports. But Ryan has countered that there is “nothing more insidious that a country can do to its citizens than debase its currency.”

Ryan's track record adds more support to arguments in Patrick's post from earlier today that the GOP ticket's lack of concrete solutions to the unemployment problem is not merely oversight or incompetence – it's ideological. Take a look at Plumer's explanation of what Ryan endorses instead:

As an alternative approach, Ryan has suggested that the United States should return to “sound money” by anchoring the value of the dollar to, say, the price of a basket of commodities. This isn’t quite a return to the long-abandoned gold standard, but it’s a roughly similar concept. It would prevent the Federal Reserve from boosting the money supply in times of crisis, as the Fed did in 2008. And Ryan’s approach could have other downsides as well. As economist David Beckworth explained here, if the dollar was pegged to commodities like metals or soybeans, it would be greatly affected by outside forces, such as swings in Chinese demand. “For better or for worse,” he told FrumForum’s Noah Kristula-Green, “the political process can’t allow big swings in the monetary policy by outside forces.”

While Ryan has vaguely and recently disavowed his Ayn Rand allegiances, her philosophies are largely in line with Ryan's monetary stances, as Dave Weigel explains. Linking to Ryan's 2005 speech to the Atlast Society, he parses Ryan's statement that "I always go back to…Francisco d'Anconia's speech, at Bill Taggart's wedding, on money when I think about monetary policy":

In early chapters, d'Anconia pretends to be a Bruce Wayne-esque reckless playboy. He occasionally slips, because he's a Rand character. Thus, "Bill Taggart's wedding speech," when d'Anconia goes to the party of a businessman using state connections to make money. A left-wing magazine writer tells him that "money is the root of all evil."

That sets off d'Anconia, who launches rant about money that runs to 23 paragraphs. "When you accept money in payment for your effort," he says, "you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor – your claim upon the energy of the men who produce."

As Jane Mayer and Tim Mak have both pointed out, his rejection of Rand's philosophy has mainly emphasized his disagreement with her atheism. Writes Mak:

“I reject her philosophy,” Ryan told the National Review in April. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas…Don’t give me Ayn Rand.” But Ryan’s disavowal’s come after years of promoting Rand’s books and endorsing her in 2009 as doing “the best job of anybody to build a moral case of capitalism.”

Previous coverage of Ryan and his plan here, here and here.