Writing in the Washington Examiner, Timothy Carney looks at the factions behind the recent Summers-Yellen competition for the Fed’s chairmanship.
“Right vs. Left” narratives are of pretty limited value in discussing the politics of the central bank, as the conservatives by themselves generally lack the intellectual firepower to offer any substantive critique of Quantitative Easing. Most factional infighting about the central bank in Washington appears to come down to petty questions of politics and personalities.
There is one group that has a coherent critique of the fed, of course, as Carney notes:
Ron Paul in recent years brought Fed policy to the attention of many conservatives. Paul comes from the “Austrian School” of economics inspired by Ludwig von Mises and Friederich Hayek.
“Austrians” like Paul criticize our current system in which the Fed creates money out of thin air. For the past four years, for instance, Ben Bernanke’s Fed has engaged in quantitative easing — or buying trillions of dollars of Treasury bonds and mortgage-backed securities.
The money the Fed spends to buy these assets doesn’t come out of any finite account — it’s money that previously didn’t exist. So, QE increases the supply of money. There are many ways to put a dollar figure on the money supply, and the broadest measure, the “monetary base,” has increased from $800 billion in 2008 to nearly $3.5 trillion today.