Protestants Will Never Understand Monetary Policy

“Any central bank's ability to boost labor productivity is doubtful; whether recovery produces high or low value jobs is a complex matter of demographics, structural factors in the economy, and taxes and regulation. Attempting to manage this process must at some point run up against the BOE's inflation-fighting objectives, and no amount of assurances from Mr. Carney will mitigate the damage when that happens.”
--WSJ editorial board, August 8th, 2013

There are powerful forces arrayed against growth in the world today: the Dallas Fed, the Bundesbank, the ECB, the Ron Paul family, the entire German nation, Obama’s monetary ignorance, and the editorial board of the Wall Street Journal, the official organ of the orthodox right.

The WSJEB, headed by the estimable Paul Gigot (and controlled by my guy Rupert Murdoch) is an avatar of hard money, pain, discipline and depression. Like the Republican right in 1896 and 1933, they think that the problem is imminent inflation, and the populist challenge to the divine gold standard. They are what we now call “Austrians”, which has nothing to do with the wonderful people who inhabit Austria and serve great food. 

“Austrians” want hard money, oppose the idea of central banks, and want zero inflation. It is a charming and in many ways an admirable philosophy, but it is nonetheless pre-Copernican. The earth is not flat, and money matters. Yes, it would be a better universe if the earth were flat, and the sun revolved around the earth on a daily basis, and money didn’t matter. But it just ain’t so.

The WSJ doesn’t like Mark Carney (the new Canadian head of the BoE) because he is a monetarist, indeed maybe even a secret market monetarist. He has said things that have been interpreted as verging on Sumnerism: nominal targeting. In other words, he is an inflationist in the Fisher-Friedman-Bernanke-Krugman tradition. These are the kind of people whom one doesn’t want one’s daughter to meet, let alone date or, God forbid, marry. They are cheap and unclean.

The WSJ is worried that Carney might decide to target nominal growth, even if that meant massive money growth and higher inflation. No, in the eyes of the Journal, high unemployment is peachy, but inflation above 2% would be catastrophic.

The World’s Opinion Page

Help support Project Syndicate’s mission

subscribe now

Why is the Right so in love with hard money, low inflation, and high unemployment? Here is my answer: because they do not believe that there is such a thing as a free lunch. You could spread out a smorgasbord of caviar, salmon, lobster and Dom Perignon, and they would turn their heads and eat a cheese sandwich. Reflation is easy and thus sinful. It’s that Protestant thing. The only people who understand monetary policy are Jews and Catholics.;
  1. Sean Gallup/Getty Images

    Angela Merkel’s Endgame?

    The collapse of coalition negotiations has left German Chancellor Angela Merkel facing a stark choice between forming a minority government or calling for a new election. But would a minority government necessarily be as bad as Germans have traditionally thought?

  2. Trump Trade speech Bill Pugliano/Getty Images .

    Preparing for the Trump Trade Wars

    In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.

  3. A GrabBike rider uses his mobile phone Bay Ismoyo/Getty Images

    The Platform Economy

    While developed countries in Europe, North America, and Asia are rapidly aging, emerging economies are predominantly youthful. Nigerian, Indonesian, and Vietnamese young people will shape global work trends at an increasingly rapid pace, bringing to bear their experience in dynamic informal markets on a tech-enabled gig economy.

  4. Trump Mario Tama/Getty Images

    Profiles in Discouragement

    One day, the United States will turn the page on Donald Trump. But, as Americans prepare to observe their Thanksgiving holiday, they should reflect that their country's culture and global standing will never recover fully from the wounds that his presidency is inflicting on them.

  5. Mugabe kisses Grace JEKESAI NJIKIZANA/AFP/Getty Images

    How Women Shape Coups

    In Zimbabwe, as in all coups, much behind-the-scenes plotting continues to take place in the aftermath of the military's overthrow of President Robert Mugabe. But who the eventual winners and losers are may depend, among other things, on the gender of the plotters.

  6. Oil barrels Ahmad Al-Rubaye/Getty Images

    The Abnormality of Oil

    At the 2017 Abu Dhabi Petroleum Exhibition and Conference, the consensus among industry executives was that oil prices will still be around $60 per barrel in November 2018. But there is evidence to suggest that the uptick in global growth and developments in Saudi Arabia will push the price as high as $80 in the meantime.

  7. Israeli soldier Menahem Kahana/Getty Images

    The Saudi Prince’s Dangerous War Games

    Saudi Arabia’s Crown Prince Mohammed bin Salman is working hard to consolidate power and establish his country as the Middle East’s only hegemon. But his efforts – which include an attempt to trigger a war between Israel and Hezbollah in Lebanon – increasingly look like the work of an immature gambler.