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Pawlenty Denounces “Fiat Money”

That former Minnesota Governor Tim Pawlenty is an ignorant monetary crank would, by itself, be an interesting story. But in light of his efforts to position himself as the generic Republican par excellence it’s even more distressing to learn that he seems to see this as a new consensus view among conservative activists:

The likely presidential candidate said the government, under President Obama, has devalued the dollar by injecting “fiat money” into the economy in an attempt to boost it — a plan he said will be damaging in the long-run. […] The Obama administration has pointed to positive signs, such as Feburary’s strong job report, as evidence the economy is now steadily growing. Democrats have also argued the report shows that steep spending cuts proposed by Republicans could stunt further job growth.

Several points in response. One, it might interest Pawlenty that the United States of America has been on “fiat money” since at least 1933. Two, it might interest Pawlenty that when the Franklin Delano Roosevelt administration took the dollar off the gold standard he was roundly denounced by conservatives for debasing the currency. Three, it might interest Pawlenty that cross-nationally monetary debasement proved to be a highly effective strategy for increasing real output during the Great Depression:

Four, it might interest Pawlenty that of the industrialized countries that have best weathered the recession, three (Canada, Australia, Norway) are natural resource exporters and two (Israel and Sweden) were practitioners of unorthodox monetary policy.

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