When I was in high school, one of my political science teachers explained to us that the political spectrum wasn’t so much a straight line – with the liberals on the left and the conservatives on the right – but was really shaped like a horseshoe, with the far left and the far right moving closer together at the outer fringes to the point where they almost meet. That the name-calling and the accusations – and the behavior – are most vehement at the outer edges doesn’t change the fact that the things they say they believe in are virtually indistinguishable from each other, only the labels are different.
President Trump’s plan to nominate Herman Cain and Stephen Moore to the Federal Reserve is a good example. These two men have undisputed conservative credentials and are also in sync with the president’s demand that the Fed adopt an easy money policy so as not to undermine U.S. economic and stock market gains. Not surprisingly, that makes them completely unacceptable to the left.
There’s been the obligatory hand-wringing and phony outrage by their opponents decrying that Trump “means to remake the 105-year-old agency into a partisan tool” (the Washington Post) and “trample over the Fed’s independence” (the Financial Times). We got the same blather when Trump nominated someone to the Supreme Court – which, we’ve been told, is completely independent and never, ever takes politics into consideration when it decides cases, and justices are never, ever chosen because of their perceived political views.
Already, even before they’ve been formally nominated by the White House, Trump’s opponents have started to dredge up all the dirty laundry they can about Cain – alleged sexual harassment eight years ago – and Moore – all the juicy details about his divorce. Whether or not those past sins will be enough to torpedo their nominations remains to be seen. But it’s likely their personal peccadillos – not their actual monetary and economic philosophies – will be the main focus of their nomination hearings, should they even get that far.
Indeed, the exact agenda that Cain and Moore support has gotten little scrutiny. Just the mere fact they have an agenda is bad enough and needs to be opposed at all costs, no matter what it is. If Trump is for it, it must be stopped.
What that agenda is, to simplify it, is Easy Money. Despite being avowed conservatives, both Cain and Moore say they agree with Trump that the Fed needs to back off its supposed tight-money policies – which as of last November, it basically already has, either due to pressure from Trump and his constant criticism of Fed Chair Jerome Powell (whom, lest we forget, he appointed) or the investment community.
So, as far as their economic and monetary philosophy is concerned, Cain and Moore should feel right at home at the Fed, the home of Easy Money. So why all the fuss?
Meanwhile, on the left, we have the Free Money advocates. With just one or two exceptions, every man and woman who has announced their intention to run for the Democrat nomination for president supports all or some aspect of Free Money, whether it’s Medicare for all, universal basic income, free tuition for college students, or some other government giveaway program. The Free Money philosophy even has its own school of economic “thought” called Modern Monetary Theory, which basically says that the Fed can print money endlessly to pay for everything without any negative consequences. A little different than Easy Money, just a little more “progressive.”
That’s how next year’s presidential race is shaping up, then. On the right, we have the party of Easy Money. People will still have to go to work and pay for things, but interest rates will remain at rock bottom, at zero or pretty close to it, presumably fueling economic growth and the bull stock market. On the left, we have the party of Free Money, where people don’t have to work if they don’t want to and the government will supply them whatever they need regardless, no questions asked.
In other words, both sides have basically thrown overboard the whole idea of fiscal responsibility. Federal deficits? That is so 1980.
This state of affairs is what we’ve reaped from the dovish policies of the Fed and just about every other major central bank over the past 10 years. It now appears that keeping interest rates at or near zero percent wasn’t just a temporary expedient to fight the Great Recession. It has instead become permanent monetary policy. So now the only choices we have left are Easy Money or Free Money – or both.
Unfortunately, both roads, while fun to be on for a while, eventually lead to hyperinflation and economic devastation. We can change monetary policies, but we can’t rewrite the basic laws of economics.
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INO.com Contributor - Fed & Interest Rates
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.