Witness Marco Rubio:
Sound monetary policy would also encourage middle class job creation. The arbitrary way in which interest rates and our currency are treated is yet another cause of unpredictability injected into our economy. The Federal Reserve Board should publish and follow a clear monetary rule – to provide greater stability about prices and what the value of a dollar will be over time.
Rubio is saying nothing coherent here--besides: "Bernanke bad! Bernanke bad! I'm not sure why, but Bernanke bad!"
Rubio, you see, wants the Federal Reserve to stabilize three things:
- The path of the price level,
- The value of the dollar, and
- The level of interest rates.
But you cannot do this. cannot stabilize the path of the price level and the exchange rate and nominal interest rates. Were we to confirm The One Who Is to chair the Fed, she could not do it.
If you stabilize the exchange rate--i.e., set up a gold standard and join it--interest rates and the price level will do their thing.
If you stabilize the nominal interest rate, you will find yourself in either an inflationary or deflationary spiral.
And if you stabilize the path of the price level, you will have to do some serious leaning against the wind with interest rates, and that will set the currency bouncing around.
I would call for Republicans to step up their game. But what's the use? No Republican primary voter, no advisor, no donor, no fundraiser will care that Rubio is talking economic incoherence. No Republican economist of note will shy away from boosting Rubio because his speechwriters lack basic economic literacy.
This is who they are. We have to deal with it.