NEW YORK SUN: Sarah Palin For The Fed?
The big question as Chairman Bernanke gets set for his first quarterly press conference is how Sarah Palin was able to figure out sooner than everyone else that the Federal Reserve’s campaign of quantitative easing wouldn’t work. Disappointment in the Fed’s policies is being reported this morning at the top of page one of the New York Times. It reports that “most Americans are not feeling the difference” from the Fed’s “experimental effort to spur a recovery by purchasing vast quantities of federal debt.” It reports that “a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.”
It’s a terrific story, and well-timed, given that on Wednesday Mr. Bernanke will break tradition and meet with the press. It is part of the Fed’s effort to get ahead of what is emerging as a public relations catastrophe, as gasoline is nearing six dollars a gallon at some pumps, the cost of groceries is skyrocketing, and the value of the dollars that Mr. Bernanke’s institution issues as Federal Reserve notes has collapsed to less than a 1,500th of an ounce of gold. Unemployment is still high. Shakespeare couldn’t come up with a better plot. But how in the world did Mrs. Palin, who is supposed to be so thick, manage to figure all this out so far ahead of the New York Times and all the economists it talked to?
She did this back in November in a speech at Phoenix, which the Wall Street Journal, in a laudatory editorial at the time, characterized as zeroing in on the connection between a weak dollar and rising prices for oil and food. “We don’t want temporary, artificial economic growth brought at the expense of permanently higher inflation which will erode the value of our incomes and our savings,” the Journal quoted Mrs. Palin as saying. “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.” Now here is the New York Times quoting a raft of economists who have reached the conclusion that Mrs. Palin’s warning was right down the line.
Read the whole thing.
UPDATE: Don Surber:
The Fed bet $900 billion it didn’t have — and it lost. . . . There should be severe penalties and frankly, not only should we fire Ben Bernanke, but we should strip him of his pension and sue him for economic malpractice. There should also be a federal grand jury investigating this monumental failure.
I think we’ll hear more sentiments along this line as the news of the Fed’s failure sinks in.
ANOTHER UPDATE: Reader Mike Cardwell writes:
Inflation is poorly understood, but let me submit a basic propositions. The much more obvious reasons for inflation are rising input prices due to increasing restrictions on supply of these key ingredients. There’s much to blame Obama and the Democrats for. They’ve made working more expensive (min wage, health care, etc) and crummy foreign policy is making oil more expensive. Labor and oil are basic ingredients to most every good created by our economy, and so we get price inflation.
Whatever the policy failings of the Fed are (and I could go on at length on them), this isn’t one of them. The simple truth is both easier to understand and more damning. But we have to understand it in order to fix it.
The test of understanding is predictive power. And reader Eric Schubert emails:
As much as it pains me, I have to strongly disagree with you and Sarah. I’m a financial historian by background whose doctoral study focused on financial crises. I strongly agree with the Fed Chairman’s choices in quantitative easing. He is more than aware of some of the inflation risk associated with his actions, but I agree with his assessment that the absolute devastation that accompanies real deflation more than offsets the well-know downsides of QE. The Chairman made his bones studying the Great Depression, and he is determined to avoid that death spiral. He should be applauded, not condemned.
If you need to blame someone, blame the President and former Speaker Pelosi who utterly wasted $800 billion on a rushed, ill-conceived, politically-driven stimulus package. Spending on public goods can be very beneficial when they complement the private sector, rather than focusing on consumption spending or social engineering.
The Fed Chairman was the only adult in the room in economic policy from the Fall of 2008 through the Fall of 2010. He can’t control the stalemate in Congress, nor can he be held responsible for the unwillingness of large portions of the public to face up to our poor long-term finances.
Well, that’s certainly true.