Republican Leaders Urge Federal Reserve To Adopt Policies to Weaken the Economy

GOP Apparently Fears Any Recovery Will Aid Mr. Obama – And That Would Be Wrong (For Them, not the Country)

There are two things about the Federal Reserve System that everyone should be aware of.  The first is that the Fed has a mandate to pursue monetary policy which will produce a strong and vigorous economy with price stability.  The second is that the Fed is an independent government agency, deliberately made that way so it can pursue needed but politically unpopular programs.



Republicans:  If the economy could just get
to this level we would win in 2012!



Now if the Fed implements monetary policy that helps the economy recover, this will increase the likelihood that Mr. Obama can be re-elected.  That is totally unacceptable to Republicans, so Mr. Boehner, the Speaker of the House and Mr. McConnell the Senate Minority Leader and other Republican leaders have written to Fed Chairman Ben Bernanke telling him in no uncertain words that he should not implement policies to help the economy.

Now obviously the Republican leaders cannot be this blunt, so they have said this.

The GOP lawmakers claim that another round “could exacerbate current problems or further harm the U.S. economy.”

“Such steps may erode the already-weakened U.S. dollar or promote more borrowing by overleveraged consumers,” they wrote. “To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.”

That’s right, contrary to economic teachings for the last 100 years or so, Republicans believe that Fed policy to stimulate the economy will hurt the economy.  However, the way that we know that what they really want is for the economy to further decline is in their call for a stronger dollar.  A stronger dollar will decrease exports and decrease economic activity.  So in calling for a stronger dollar Republicans are calling for a decrease in economic activity. 

If the Fed were to follow through with the Republican recommendations, and raise interest rates, which is what the policy results the Republicans want would require, the result would be additional unemployment possibly in the hundreds of thousands.  But of course, no sacrifice, by others, is too great to achieve Republican electoral victory.

Oh, don't expect the nation's media to call the Republicans on this issue, that would be "class warfare" and "media bias", or as The Dismal Political Economist likes to call it, "professional journalism".