Krugman vs. Stockman on Audit the Fed

Paul Krugman and David Stockman offer up some thoughts on Sen. Rand Paul’s much debated “Audit the Fed” bill. First, from the Nobel Laureate via this item at the NY Times.

Here’s my current thought: in some sense money is a really weird thing, which can look to individuals like a real asset — cold, hard, cash — but is ultimately, as Paul Samuelson put it, a “social contrivance” whose value is more or less conjured out of thin air. Mainstream macroeconomics acknowledges the weirdness — in particular, makes heavy reliance on the ability of central banks to create more fiat money at will — but otherwise treats money a lot like ordinary goods. But that intellectual strategy doesn’t come naturally to many people, so there’s always a constituency for monetary cranks.

Yes, anyone who questions the longevity of the world’s latest fling with a pure fiat currency is a monetary crank and, given the staunch defense of the Fed in this latest round of commentaries by the mainstream financial media, that is clearly the consensus view.

Enter David Stockman, former Reagaon Budget Director and monetary crank who teaches us (or, at least, me) a new word in this piece at his Contra Corner blog.

The reason to be fearful about the economic and financial future is that we are in the thrall of a mainstream consensus that is downright meretricious.
…
Folks, this whole chorus of Fed governors—–yesterday’s lineup included Richard Fisher and Charles Plossner—-defending the sacred “independence” of the Federal Reserve is downright Kafkaesque. Rather than protecting the Fed from meddling politicians, it is the American public that desperately needs protection from the depredations of an unelected monetary politburo that runs the entire financial system.

The outpouring of anti-”Audit the Fed” commentaries is something to behold, as should be clear when looking at today’s links post. I rarely read comments on news stories or blog posts, but I’ve been making an exception for this subject since you can really get a good feel for the vast Krugman/Stockman divide when doing so.