“If this guy prints more money between now and the election,” Perry said, “I don’t know what y’all would do to him in Iowa, but we -- we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous in my opinion.”
He added, “We’ve already tried this. All it’s going to be doing is devaluing the dollar in your pocket and we cannot afford that. We have to learn the lessons of the past three years that they’ve been devastating. The President of the United States has conducted an experiment on the American economy for almost the last three years, and it has gone tragically wrong and we need to send him a clear message in November of 2012 that new leadership is coming.”
Perry, who officially entered the presidential race on Saturday, was responding to a question from a member of the audience at a backyard county Republican Party gathering here who asked him what he would do with the Federal Reserve.
Speaking in Iowa, the presidential candidate initially said he would “take a pass” on a question about what he’d do with the Federal Reserve. Then Perry said of Fed Chairman Ben Bernanke, “If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost … treasonous in my opinion.”
We’ll leave it to others to assess the implications of Perry’s comments on his political campaign. On the economics, it’s not even entirely clear what exactly the Texas governor thinks printing more money would do. (His remark could be construed as an acknowledgment that such a move would help the economy in the next 15 months before the November 2012 election. Some might disagree.)
Of course, other GOP presidential candidates and potential candidates have taken to attacking the Fed, particularly since it embarked in its second round of bond-buying, or quantitative easing, last November. Rep. Ron Paul of Texas has even built a movement around a political platform that includes shutting down the U.S. central bank. But Perry had been seen as a more mainstream candidate drawing wider support.
The attacks against QE2 last fall came from conservatives in the U.S. (largely worrying about long-run inflation risks) and officials in other countries (worrying about the effects of a weaker dollar on their export sectors). Amid the political backlash, some bond investors believed the attacks could diminish the chances of the Fed expanding its bond purchases to boost the economy — thus limiting the program’s effectiveness by shaping market expectations for future Fed action.
The Fed’s willingness to open the door to QE3, as it did last week, suggests Bernanke is willing to embrace the political independence embedded in his role to do what Fed officials think the economy needs. With inflation still near the Fed’s target, unlike last fall when Fed officials worried openly about deflation, the bar still remains high for another round of bond-buying anytime soon.
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