Where to begin?
I have no idea who Megan McArdle is. But she seems to inspire a great deal of acrimony in the blogosphere, and, more to the point, she spent an inordinate amount of time and effort yesterday and the day before on her own blog trying to knock down Ron Paul's economics.
Alas, I don't have time to address her concerns point-by-point. I'll merely link to one post of hers, in which she highlights the video of a recent exchange between Paul and Ben Bernanke on Capitol Hill. Beaming with pride, she believes she discredits Paul's position with one pithy paragraph:
Ron Paul's supporters see the might of his common sense slashing
through the doubletalk of the financial solons. I see a really, really
smart economist responding to Ron Paul the same way you react to Cousin
Mildred when she corners you after Christmas dinner to complain about
the flouridation of the water supply. WhatCongressmanDr.
Paul is saying doesn't make any particular sense; American consumers
are not particularly suffering because of the decline of the dollar,
the dollar is not declining because of Fed policy, and the Federal
Reserve has nothing to do with a relative scarcity of oil and food,
which is what is driving the CPI increases he complains about. If we
were on the gold standard, oil and food would still be getting more
expensive, and people on fixed incomes would still be feeling the pinch.
Oh, where to begin? I'll try to address this with a pithy paragraph of my own: American consumers are suffering from the decline of the dollar because they buy a large quantity of imported goods that are rising in price because of the dollar's fall. To say the dollar is not declining because of Fed policy is disingenuous; yes, the dollar is declining because of the actions of currency traders (I assume that's her drift, but she leaves it for us to infer that), but the currency traders are clearly reacting to the Fed's reflation efforts; supply and demand, Megan — more dollars mean fewer people want to hold onto 'em. And no, the Fed can't control the scarcity of food and oil, but the price of food and oil are rising much more slowly when measured in euros and loonies and Aussie dollars. If we were on the gold standard, oil and food would still be getting more expensive, but not nearly as much; the point is that people on fixed incomes could allocate their scarce resources rationally, without the fear that their paper dollars were getting more worthless, making everything more expensive. And the CPI numbers, well, they're doctored beyond belief with hedonics and substitution and other feats of statistical legerdemain.
OK, not as eloquent or snarky as Ms. McArdle's effort, but I have a day job to attend to.
Update: J.H. Huebert has a more effective smackdown . To smear Paul as a knuckle-dragging xenophobe is sheer, willful ignorance.
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