“There is nothing more insidious that a country can do to its citizens, than debase its currency,” Ryan said to Bernanke.
While we are on the subject of debasing currencies: One of Friedman’s most enduring pieces of straight economic analysis was his 1953 argument in favor of flexible exchange rates, in which he argued that countries finding themselves with excessively high wages and prices relative to their trading partners — like the nations of southern Europe today — would be better served by devaluing their currencies than by enduring years of high unemployment “until the deflation has run its sorry course.”
Again, there is no room for that kind of pragmatism in a party in which many members hanker for a return to the gold standard.
Now, I do not want to put Friedman on a pedestal. In fact, I would argue that the experience of the past 15 years, first in Japan and now across the Western world, shows that Keynes was right and Friedman was wrong about the ability of unaided monetary policy to fight depressions. The truth is that we need a more activist government than Friedman was willing to countenance.
The point is that modern conservatism has moved so far to the right that it no longer has room for even small concessions to reality. Friedman tried to save free-market conservatism from itself — but the ideologues who now dominate the Republican Party are beyond saving.