The biggest risk to us all may be the leading certifiable nut in Congress, Ron Paul. He is potentially going to be appointed head of the banking committee panel on monetary policy. Ron Paul, you are probably aware, believes that the Fed should be eliminated entirely, that we should be back on the gold standard, and he contends that the Fed financed Saddam. That he is even strongly contending for the subcommittee chairmanship should tell you everything you need to know about why Congress is so inept and so damaging to the economic recovery. There are no qualifications for these powerful committee chairs. Just they somehow managed to get reelected more times than others. The really scary part is his son is now a senator and there are other tea party representatives now in Congress who actually support this insanity.

If Paul becomes chair of this committee, Barnanke will be spending his time being grilled and the subject of bizarre charges and questions about everything. Congress actually passed a Fed audit requirement in Dodd-Frank. How is the Fed to function as a central bank if they have to always look over their shoulder wondering when the next TV spectacular will be staged by Ron Paul and his panel demanding to know why they raised rates, or did whatever on monetary policy.

It is bad enough that Pelosi and Reid are still around to create gridlock and havoc as we see on the political theater that tax extension legislation has become. Dear Nancy will continue to be the same left wing zealot she has always been and, as leader of the left wing, she will continue to demand all sorts of anti business clauses and other legislative problems for all of us. Harry is in a position to block anything that is not sufficiently left wing to satisfy him. Now that the Republicans control the House, Harry will do even more to stop pro business legislation and tax rules. Obama is not going to move sufficiently to the center as Clinton did, so not much good is coming in the next two years.

It is impossible to predict what all of this will mean for when the Fed shifts to raising rates and tighter money, but it will probably now be a little longer than might be good. With Congress breathing down his neck, Bernanke will be hesitant. In the short run you might be tempted to say that is good for real estate in that rates will remain at a low enough level to refi out of the problems we have and to carry properties to the point when recovery is sufficient to justify higher values. That is short run thinking and long run problems. We are all far better with a well managed monetary policy than with politically modified policies that will not deal with currency and bond market dislocations caused by a nut job running a monetary policy committee in Congress. If you have any influence with senior Republican Congress men you need to tell them that having Ron Paul in charge of the monetary policy committee will be severely damaging to the economy and needs to be prevented.

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Ron Paul And The Implications For Monetary Policy

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