Krugman on Ron Paul's view of money

[ProSense]

Paleomonetarism

I used that term — it’s probably not original, but who knows? — in a recent post about the increasingly obscure meaning of the money supply. The best example would surely be Ron Paul, who’s now going to have oversight over the Fed. If you read his stuff, it’s very clear: money is a well-defined quantity that the Fed controls, and inflation comes from — indeed is defined as — increases in that quantity.

What he means, I guess, is monetary base. Here’s the actual relationship between monetary base and inflation:

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It’s also worth nothing that in normal times (not now), monetary base consists overwhelmingly of currency (bank reserves are normally very small), and the majority of US currency isn’t even being held in the United States.

It’s kind of terrifying, in a way, to realize that the politically dominant faction in America right now has a view of money, what it is, and how it works that hasn’t been true since the early 19th century, if it ever was.

[geckosfeet]

1. Looks like the roN pOaul lovers have been un'reccing this.

[ProSense]

2. No other comments? n/t

[geckosfeet]

3. FWIW - I think Krugman has a very interesting analysis here. On the one hand,

roN paul's simplistic position is great for the baggers. They like their money. Money good. Taxes bad. More money good. Just keep repeating this for the baggers.

Most people have simply never given any thought at all to our monetary systems. Or indeed to the concepts of wealth, value and ownership. To question their understanding of these rather abstract social contracts rattles them to the core.

But in general it is becoming obvious the global economic policy needs to be understood. At a minimum, we need leaders who know that global economic policy needs to be re-evaluated and designed to protect the people whom it serves.

Krugman is simply saying the paul is exploiting fear and ingnorance for political expediency, and behind our back most certainly manipulating policy to benefit existing wealth. OK. Maybe he didn't say that explicitly. But I am.

[ProSense]

4. Well said.

Paul, despite his rhetoric about ending the deficits, voted to give tax breaks to the rich.

He's for ending deficits and giving huge tax breaks so he's basically for destroying government.