A hard-money political strategy also has three risks Republicans should bear in mind.
The first is that it will cost them elite support. Presidential candidates generally like having a lot of mainstream economists endorse them. The vast majority of economists rightly think the gold standard is a terrible idea. That’s true even of the right-leaning ones, and even of the ones who have reservations about the Fed’s quantitative-easing policy.
Second, hard-money politics can make Republicans seem indifferent to unemployment. By law, the Fed must try to keep both inflation and unemployment low. The Republicans’ chief legislative proposal on monetary policy is to have the Fed drop the employment goal and focus single-mindedly on inflation. Bringing more attention to that position isn’t going to make Republicans more popular.
The third and biggest risk is that Republicans would eventually gain power and then impose an excessively tight policy. Errors of this sort have in the past proved disastrous – – not only economically but also, for conservatives, politically. Excessive tightness by the Federal Reserve made the New Deal possible in the 1930s. Money was much too tight in 2008, too, and it led to the swollen Democratic majority that enacted President Barack Obama’s health-care law. In recent years, deflationary policies have hurt right-of-center parties in Argentina and Sweden as well.
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