Battle4Liberty

Texas Governor Rick Perry  raised eyebrows Tuesday when he said he would consider it almost treasonous if Ben Bernanke plays politics by printing more money between now and the election to boost the economy. Eager to castigate the Republican presidential candidate as a rogue, unpolished Texas radical, the “mainstream media” was quick to reframe the statement as a threat. It would make sense to ask Governor Perry to explain this comment, as many Americans–including members of the press–don’t understand the huge role played by the Federal Reserve in our economy.

Perry’s Texas vernacular aside, there are several takeaway points here. First, he is right. It would be treasonous for any Fed chairman to “play politics” when conducting its affairs. The Federal Reserve is supposed to be an independent body, but many of its financial decisions are not made public. Perry expanded his comment today by calling for greater transparency, ostensibly supporting Ron Paul’s effort in the House to demand that the Fed open its books. Paul has made this argument for years, but it’s a breath of fresh air to see others follow suit.

Second, the Fed does a lot to damage our economy. QE1 and QE2 were analogous to printing money, something that always devalues existing currency. Keeping interest rates artificially low encourages malinvestment by directing investment capital to projects that don’t always have the best prospects for success. All of this has been addressed in previous posts, but suffice to say that most Americans continue to vastly underestimated the Fed’s role in the economy.

Finally, the response to Perry’s comment points to a growing demarcation between two factions in the Republican party. On one side, Karl Rove and other “conservatives” called his comments irresponsible, but these establishment Republicans are really moderates at best. These same commentators argued that the Boehner debt ceiling deal wasn’t all that bad after all, ignoring the fact that it barely makes a small dent in Washington’s spending addiction. While they want to tweak the current approach to government, those on the other side–Ron Paul, Michelle Bachmann, and the tea party in general–want to change it altogether. Both factions are powerful wings of the party and it will be difficult for any Republican to win the White House without support from both sides.

I don’t agree with all of Perry’s positions, but I applaud his willingness to raise the Fed issue. Perhaps others in the field would like to engage in a serious debate about Fed policy. Mitt Romney would be a great place to start.