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Monday, November 15, 2010

Earth to Bernanke: Please Stop Quantitative Easing (QE 2)

The ground swell of people opposing Ben Bernanke's crazy Quantitative Easing (QE 2) program grows. Today 23 high profile economic and financial leaders wrote an open letter to Bernanke in the Wall Street Journal. They don't want QE 2. The Federal Reserve in responding said, they are "confident that it has the tools to unwind these policies at the appropriate time." Trusting that Ben Bernanke can put the currency debasement/inflation genie back in bottle is not a risk the country can afford to take.

Wall Street Journal:
Open Letter to Ben Bernanke --

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.” In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

Cliff Asness
AQR Capital

Michael J. Boskin
Stanford University
Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)

Richard X. Bove
Rochdale Securities

Charles W. Calomiris
Columbia University Graduate School of Business

Jim Chanos
Kynikos Associates

John F. Cogan
Stanford University
Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)

Niall Ferguson
Harvard University
Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas
Manhattan Institute & e21
Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant
Grant’s Interest Rate Observer

Kevin A. Hassett
American Enterprise Institute
Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog
The Hertog Foundation

Gregory Hess
Claremont McKenna College

Douglas Holtz-Eakin
Former Director, Congressional Budget Office

Seth Klarman
Baupost Group

William Kristol
Editor, The Weekly Standard

David Malpass
GroPac
Former Deputy Assistant Treasury Secretary (Reagan Administration)

Ronald I. McKinnon
Stanford University

Dan Senor
Council on Foreign Relations
Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle

Amity Shlaes
Council on Foreign Relations
Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer
Elliott Associates

John B. Taylor
Stanford University
Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)

Peter J. Wallison
American Enterprise Institute
Former Treasury and White House Counsel (Reagan Administration)

Geoffrey Wood
Cass Business School at City University London

A spokeswoman for the Fed responded:

“As the Chairman has said, the Federal Reserve has Congressionally-mandated objectives to help promote both increased employment and price stability. In light of persistently weak job creation and declining inflation, the Federal Open Market Committee’s recent actions reflect those mandates. The Federal Reserve will regularly review its program in light of incoming information and is prepared to make adjustments as necessary. The Federal Reserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment. In particular, the Fed has made all necessary preparations and is confident that it has the tools to unwind these policies at the appropriate time. The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.”
-----
Reuters:
Lacker says Fed's new easing push too risky -- Richmond Federal Reserve President Jeffrey Lacker indicated on Sunday he opposed the central bank's new round of monetary easing, saying he believed the policy was potentially dangerous and likely ineffective...
----
Wall Street Journal:
Fresh Attack on Fed Move -- The Federal Reserve's latest attempt to boost the U.S. economy is coming under fire from Republican economists and politicians, threatening to yank the central bank deeper into partisan politics.

A group of prominent Republican-leaning economists, coordinating with Republican lawmakers and political strategists, is launching a campaign this week calling on Fed Chairman Ben Bernanke to drop his plan to buy $600 billion in additional U.S. Treasury bonds...
discussion:
Jennifer Rubin / Commentary:   RE: A Significant Letter
Jon Talton / Seattle Times:   Checking out the Fed bashers
Doug Brady / Conservatives4Palin.com:  More Evidence Governor Palin Is Correct About Rising Food Prices …
Myglesias / Yglesias:  Monetary Mysteries  —  A bunch of conservative economists …
Lew Rockwell / LewRockwell.com Blog:   Mises-Hayek-Hazlitt-Rothbard- Ron Paul
Economics Policies for the 21st Century:   An Open Letter to Ben Bernanke
John McCormack / Weekly Standard:   Conservatives vs. the Fed
Jessica Pressler / New York Magazine:   Republicans Plan Defeat of Successful Stimulus Plan
Kevin Drum / Mother Jones:   “Outspoken and Unified" 
ZeroHedge: 22 Luminaries (And Dick Bove) Sign Open Letter To Fed Demanding End Of QE2
James Pethokoukis:  Bernanke probably agrees with the anti-QE2 letter
----
Inflation is not coming, it's already here!

CNBC.com:
Secret Walmart Survey Shows Inflation Already Here -- There might not have been a second round of quantitative easing, if Federal Reserve Chairman Ben Bernanke shopped at Walmart.

A new pricing survey of products sold at the world’s largest retailer showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate...
----
BusinessWire.com:
DHL Express U.S. Announces 2011 Rate Increases -- DHL, the world’s leading logistics company, today announced a general average price increase of 5.9% for its U.S. export and import services...

DHL Express U.S. adjusts its prices annually, taking into account inflation and the rising network costs of providing air express services. The general average price increase applies to all customer accounts where contracts allow...

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