I liken the Democratic and Republican parties as two major management companies pitching their management styles as the best one for managing the political economy. Political campaigns between Democrats and Republicans are public battles over whose philosophy and narrative should be allowed to guide the nation-state.
As “privateers” for the political economy, banks and their trading desks should be wary that the winner of this battle does not change the navigational charts for financial markets. But while the platforms, the sales pitches to the electorate, may look different, I see overall philosophy behind the management of the currency as being the same for both parties. The currency is a device, a mechanism that transfers value from the electorate/taxpayer/consumer to and throughout the political economy. Both parties understand this.
As the constitutionally delegated regulator of the value of money, members of Congress should be aware of the three primary measures of the value of the dollar: exchange rates; demand for Treasury notes; and dollar reserves held by foreign governments.
Not surprisingly, the platforms of neither party reflect these three primary factors. The Democratic Party’s platform makes no mention of the three primary determinants. The Democratic Party platform position on banking focuses on what they term as “illegal gambling.” Democrats want to address Wall Street speculation by “expanding safeguards that separate retail banking institutions from more risky investment operations.” According to their platform, Democrats want to modernize the Glass-Steagall Act as well as strengthen and enforce the Volcker Rule. The Democratic Party’s banking positions are consumer-centric, steering clear of discussing monetary or fiscal policy.
The Republican Party seems so stuck in the Trump era that it still displays the 2016 platform on its website. The platform does address monetary policy taking the position that the Federal Reserve should conduct monetary policy in a transparent way. In addition, the platform recommends that the United States look at ways to fix the value of the currency. Those ways include creating a commission to further study the issue as well as considering backing the currency with some type of metal. The GOP did not go as far as recommending what that metal should be.
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Neither party has taken a position in their platforms regarding interest rates, inflation, capital flows, or money supply; all important factors in valuing a currency. These are areas occupied by the Treasury and the Federal Reserve and I don’t see elected officials getting into the weeds on these factors.
Alton Drew
7 January 2024
For of my take on the American political economy, purchase my book at amazon.com/author/altondrew.
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