The GOP’s Bernanke Letter

I’m not shocked by much any more, but I am shocked by this: the leaders of one of the great parties in Congress calling on the Federal Reserve to tighten money in the throes of the most prolonged downturn since the Great Depression.

One line in the letter caught my eye as summing up the unreality of the Republican leaders’ position:

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers.

Are they serious? We are living through the most rapid deleveraging of the American consumer since the 1930s. Much of that deleveraging is occurring tragically, through the process of bankruptcy and foreclosure. Some is happening more happily, through the increase in the savings rate from the 0 of the housing boom to about 6% now.