At the Jack Kemp dinner last night, Marco Rubio touched briefly on monetary policy:
Sound monetary policy would also encourage middle class job creation. The arbitrary way in which interest rates and our currency are treated is yet another cause of unpredictability injected into our economy. The Federal Reserve Board should publish and follow a clear monetary rule – to provide greater stability about prices and what the value of a dollar will be over time.
Now what Rubio almost surely meant was changing the Fed’s dual employment-inflation mandate into a single mandate focusing on inflation, such as the ECB has. This is the current default GOP position on the Fed. But as Reihan Salam rightly points out, “There is nothing in his address that isn’t consistent with market monetarism” and targeting nominal GDP.
Rules based? Check. Predictable? Check. Transparent? Check. Even better, MM could theoretically create a market-based monetary policy removing all discretion from central bankers. That would truly “end the Fed” — at least as we know it — by creating a 21st century version of the 19th century gold standard. Market monetarism also serves a political function on the right by allowing conservatives to stop the wrong-headed Hebert Hooverization of George W. Bush. It’s time for Marco to start reading Milton.