Why Paul Ryan Is A Crank On Monetary Policy

Following the rise of Rep. Paul Ryan (R-WI) to the vice-presidential slot on the Republican ticket, most of the discussion has focused on the content and consequences of the budgets he engineered for the House GOP. But Ryan has also been a vociferous critique of the Federal Reserve and its Chairman Ben Bernanke. Given the Fed’s considerable power to effect the health of the economy and the level of employment — and its ongoing reticence to sufficiently act on that power — it’s worth calling more attention to Ryan’s views on monetary policy, which are every bit as radical as his views on government taxation and spending.

Ryan has repeatedly (and wrongly) predicted inflation. Throughout the recession Ryan reacted to monetary stimulus by repeatedly warning that inflation is just around the corner. That inflation remains at near-historic lows while unemployment has hit near-historic highs has apparently left the vice-presidential nominee undeterred. Ryan even called on the Fed to raise interest rates to combat this predicted inflation, even though increased rates would add one more drag on the already struggling economy.

Ryan wants to end the dual mandate. In 1978, Congress passed the Humphrey-Hawkins Full Employment Act, which directed the Fed to concern itself equally with keeping prices stable and unemployment low. Ryan sponsored a bill to repeal Humphrey-Hawkins and direct the Fed to concern itself solely with inflation. This reinforces the point that Ryan wants to put a thumb on the scales in favor of price stability and ignoring the need to lower unemployment. But Ryan’s argument is also based on bad history: As The Atlantic’s Matthew O’Brien notes, the period since the passage of Humphrey-Hawkins has been one of both unusually low inflation and unusually low fluctuations in the level of inflation.

Ryan is a hard-money crank. In 2009, Ryan called for the U.S. dollar to be benchmarked to a commodity standard. This is essentially a gold standard, except the gold is replaced by an alternative basket of commodities. It would also carry all of the same problems. It would shackle the Fed’s ability to assist the economy in a recession or depression. It would also drive interest rates up or down depending on how prices of those benchmarked commodities behave, regardless of whether such rate changes make sense in the context of the overall economy.


Ryan’s monetary policy hails from Ayn Rand. ThinkProgress has already reported on Ryan’s professed infatuation with the radical right-wing novelist, and how her stances have influenced his budget policy — an infatuation he has since tried to disavow. Yesterday, Slate’s Dave Weigel caught a linkage between Rand’s writings and Ryan’s monetary views as well. In 2005, Ryan told the Atlas Society, “I always go back to, you know, Francisco d’Anconia’s speech, at Bill Taggart’s wedding, on money when I think about monetary policy.” That speech is from Rand’s novel Atlas Shrugged, and features one of her protagonists praising gold as “objective value,” and condemning paper money as the destruction of value and the tool of “looters.”

As economist Mark Thoma wrote, “I don’t understand why someone with such a clownish views is lauded as a policy wonk.” But the Republicans’ presidential candidiate, Mitt Romney, has also shown a good deal of sympathy with Ryan’s views — views which, as O’Brien dryly notes, basically boil down to worrying that “the Federal Reserve will try to bring unemployment down.”