Monday, November 8, 2010

Palin to Bernanke on QE2:”Cease and Desist”

I remember a few days just before the elections last week, a talking head was saying that one of the sure signs that Palin would run would be her switching gears from campaign rhetoric to policy discussions.  Since Tuesday’s elections I have noticed two policy discussions from Palin.

The first was some pretty solid advice for Republicans taking over the House that appeared in the National Review the day after their big wins. The second is an upcoming speech Palin will be giving at a trade-association convention in Phoenix today.  In this speech she tells Federal Reserve chairman Ben Bernanke to “cease and desist" with the very dicey QE2 monetary policy. National Review offers a snippet from the speech.
National Review: I’m deeply concerned about the Federal Reserve’s plans to buy up anywhere from $600 billion to as much as $1 trillion of government securities. The technical term for it is “quantitative easing.” It means our government is pumping money into the banking system by buying up treasury bonds. And where, you may ask, are we getting the money to pay for all this? We’re printing it out of thin air.
The Fed hopes doing this may buy us a little temporary economic growth by supplying banks with extra cash which they could then lend out to businesses. But it’s far from certain this will even work. After all, the problem isn’t that banks don’t have enough cash on hand – it’s that they don’t want to lend it out, because they don’t trust the current economic climate.
And if it doesn’t work, what do we do then? Print even more money? What’s the end game here? Where will all this money printing on an unprecedented scale take us? Do we have any guarantees that QE2 won’t be followed by QE3, 4, and 5, until eventually – inevitably – no one will want to buy our debt anymore? What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher. And it’s not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar – a direct result of the Fed’s decision to dump more dollars onto the market – is pushing oil prices upwards. That’s like an extra tax on earnings. And the worst part of it: because the Obama White House refuses to open up our offshore and onshore oil reserves for exploration, most of that money will go directly to foreign regimes who don’t have America’s best interests at heart.
We shouldn’t be playing around with inflation. It’s not for nothing Reagan called it “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” The Fed’s pump priming addiction has got our small businesses running scared, and our allies worried. The German finance minister called the Fed’s proposals “clueless.” When Germany, a country that knows a thing or two about the dangers of inflation, warns us to think again, maybe it’s time for Chairman Bernanke to cease and desist. We don’t want temporary, artificial economic growth bought at the expense of permanently higher inflation which will erode the value of our incomes and our savings. We want a stable dollar combined with real economic reform. It’s the only way we can get our economy back on the right track.
The left and some of Palin’s distracters on the right have all been faulting her or being too light on policy.  I have a feeling they are going to be getting a whole lot more policy from Palin in the very near future.


Samuel Gonzalez said...

This is a very heading topic most people are not paying attention to. But, it's a very shrewd move on Palin's part to go on record about it. I think the Fed is making a major mistake and decreasing the value of the dollar even more.

NutzGearClothing said...

Please forgive me, but FUCC the Fed. I don't care much for Palin, but I agree with her position on this one. The Fed is, and has been responsible for economic/fiscal policy since its inception in 1910, and its official beginning in 1913.

Banks still spend money, and that money eventually gets into the hands of the public, but with this HUGE increase in physical currency, the fresh supply is going to be the tipping point to push the dollar down the toilet. It won't happen overnight, but our dollar will soon be abandoned by China and Russia (and other countries as well). This is the push toward a global currency.

Tim Howes said...

Good post. Ron Paul has been all over Federal Reserve issues since he became a member of the House. Up until now he has been a lone voice on Fed issues. Part of what happened in this election is that people who are willing to take the Fed to task have gained more prominence (Palin) and have been elected to high office (Rand Paul).

Related Posts with Thumbnails