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The Democrats are on the verge of losing the House, and even now for all intents and purposes, the party’s majority is useless for getting anything big passed.That alone explains why Paul Krugman, yesterday, whipped out one of Bernanke’s old speeches regarding Japan to argue that he should know to get way looser with monetary policy.
Let’s back up for a second. 6 months or a year ago, the debate was all about fiscal policy, and Krugman and his fellow travellers spent their time arguing for more spending. But they lost that argument, despite all the talk you hear about “runaway” spending. At least in their view, ever since the original stimulus package, there hasn’t been a needle-moving spending project.
And now the fiscal debate is over, so the focus naturally turns to the Fed, as the stimulator of last resort.
And it’s not just Krugman, though he’s probably the tone-setter of the economic left. Here’s Matt Yglessias slamming Bernanke.
The most important thing for the future of the country over the next decade is probably going to be what the Federal Reserve and Treasury does in the next six months.
This is it. This is the fight, and it’s why today’s FOMC is being so closely watched.
Now the question is: does all of this political pressure directed at The Fed matter? Well it’s independent, to an extent, so the various governors are pretty insulated and free to speak their mind.
But at a minimum, you’d expect Bernanke & Co. to feel professional peer pressure like everyone else. When a leader in your field who is a Nobel Prize winner and also a fellow Princeton economic team stablemate is haranguing you, along with several members of his flock, that alone is going have some effect.
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