With Perry’s introduction into the race, Michelle Bachmann had found the momentum garnered at Ames all but dissipated. The Ames straw vote was suppose to vault Bachmann into the elite level of candidates but the Perry announcement and his give and take with the Obama administration has stalled her campaign thrust for the moment. Perry’s entry into the race has put Bachmann in a solid third place and many of the Tea Party and social conservatives she was counting on are moving to Perry. (This is not a situation that can’t be reversed but for the time being, Perry has taken away momentum from Bachmann.)
Perry’s attack on Fed policy showed the effect of the Ron Paul candidacy, one of whose central theme is a return to the gold standard and a consistent attack on the Fed. Paul is the outsider looking in when it comes to monetary policy but much of the world is starting to see that the crazy old man may not be so crazy as the dollar standard is slowly evaporating. The Obama administration has made it clear, they don’t care if the dollar sinks or swims. The dollar standard was based on a premise that the United States would keep the dollar strong and maintain some economic discipline. From Reagan through Clinton, king dollar ruled but George W. Bush was not as dedicated to King Dollar and Obama has essentially decided that King Dollar doesn’t matter at all. Eliminate King Dollar and you help sink the American place in the world.
The Paul candidacy has made the gold standard into a populist cause as he linked prosperity of the Middle Class to non-inflationary currency backed by gold. If Democratic populist William Jennings Bryan decried Americans being crucified on a cross of Gold, Paul’s slogan for the 21st century, we will not be suffocated by a pile of paper dollars. Perry’s own attack on the Fed reflects that monetary policy matters to many Americans and while most Americans are not certain how a Gold Standard works or how King Dollar can become King Dollar again; they do understand that it is not good if the Dollar is inflated since it means the price of their basic goods like oil and food goes up. The last time the Dollar was linked to Gold was under the Bretton Woods arrangement set up after World War II in which the world would be under a dollar standard backed by Gold.
Richard Nixon broke the link between Gold and Dollar and since then, the strength of the Dollar has been based on the reliability of the Administration. In one swift move, Nixon imposed wage and price controls, unleashed the link between Gold and the Dollar, and simply allowed the Fed to print money in the run up to the 1972 election. Nixon had the benefit of a growing economy artificially stimulated but after the elections, the Party ended and a severe recession began. The 1970’s saw the rise of stagflation, and it took the discipline of the Fed under Paul Volcker and Ronald Reagan to tame inflation.
The dollar standard left inflation under the control of men and one only could hope that those running the economy were indeed wise men and women. The problem arose when those in charge were not wise but foolish like the present circumstances with Ben Bernanke running the Fed and Obama as President. Bernanke has been put into an impossible situation for if the Fed did not stimulate the economy, the economy would sink since anchors of lead are being placed everywhere else on the economy.
Paul’s candidacy is based on the radical idea that a group of humans can not possibly know how to run a modern economy and while many dismisses Paul’s views on monetary policy; they have yet to show that they have a better idea.
When Perry declared Bernanke’s efforts to inflate the currency near treasonous, he was building upon what Paul has started, monetary policy matters when it comes to Main Street. Paul’s effort in Iowa may fall short but his ideas are gaining legitimacy. The crazy old uncle may be wiser when it comes to money than the wise men and women of Washington.
As for Iowa, Perry may be able to deal Bachmann a devastating blow if he finishes ahead of her and Romney might be tempted to put a bigger effort if he feels that he can pull an upset. And Ron Paul has made the point; a sound dollar supported by Gold is good for mainstream Iowans.
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