The Failure of QE2

From: Don Surber

The Fed bet $900 billion it didn’t have — and it lost.

Good thing China is not the Mafia or someone would kneecap Ben Bernanke.

First, the Xtra Normal cartoon: Quantitative Easing Explained:

In that liberal shorthand that they substitute for critical thinking, this is called QE2.

But unlike the luxury ship that Cunard Lines operated for 39 years, Bernanke’s QE2 sank.

Taking with it, $900 billion.

The idea was to have the Federal Reserve buy $900 billion worth of Washington’s burgeoning debt under a Democratic Congress — up nearly $6 trillion since Democrats took over Congress in 2006 (and Congress has the power of the purse, and not the president) Quantitative Easing was pitched as another savior of the economy after the stimuli of 2008 ($150 billion) and 2009 ($787 billion) failed.

So we flushed nearly $2 trillion down the toilet and unemployment is still 8%-9% — far higher than when the government began trying to stop the inevitable retrenchment of the economy.

The fiscal plan of papering our problems over with $900 billion in new money hurt the economy.

The liberals brought back inflation.

$4 gasoline?

You ain’t seen nothing yet.

Ben Bernanke, the head of the Fed, is a fool who should be fired and replaced by Ron Paul.

From the New York Times: “The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.”

You don’t “experiment” with $900 billion you do not have.

You blow it.

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.

American conservatives tried to tell them.

From the Wall Street Journal on November 9, 2010:

Sarah Palin, delving into a major policy issue a week after the mid-term elections, took aim Monday at the Federal Reserve and called on Fed chairman Ben Bernanke to “cease and desist” with a bond-buying program designed to boost the economy.

Speaking at a trade association conference in Phoenix, the potential 2012 presidential candidate and tea-party favorite said she’s “deeply concerned” about the central bank creating new money to buy government bonds. Ms. Palin said “it’s far from certain this will even work” and suggested the move would create an inflation problem.

What exactly did she say?

From the same story, Mrs. Palin: “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.”

She referred of course to the hyperinflation in the Weimar Republic days of Germany in the 1920s — which collapsed and paved the way for Hitler and Nazi Germany.

This is what happens when a smart nation gets reckless.

From a New York Sun editorial today:

It happens that Mrs. Palin’s demarche coincided with a piece in the Financial Times by the president of the World Bank, Robert Zoellick, suggesting that a new international monetary system centered on the major currencies “should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.” The FT is such a Keynesian bastion that the Journal likened Mr. Zoellick’s mentioning gold in its pages to mentioning Sarah Palin’s name at the Princeton Faculty Club. The FT issued an editorial attacking its own op-ed piece, while Mr. Zoellick’s scoop so startled the New York Times that it brought in no less a heavyweight than James Grant of the Interest Rate Observer to write a piece on the virtues of the gold standard.

Alone among general interest publications, the Drudge Report has been fronting the gold price almost daily. And now the Times itself is out with its a story about how the Fed’s quantitative easing has been a disappointment. It may have, as the Times puts it, “pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates,” but “those benefits have been surprisingly small.” Will any of this bring some humility to the Fed and its chairman? It will be something to watch for in his first big press conference Wednesday. No doubt it will be one of the most crowded press conferences in recent memory, and there will be lots to ask about. But one of the questions will be how in tarnation Mrs. Palin figured it out so far ahead of everyone else.

How did she know? She has real world knowledge. She has run a business. She has been a governor. She actually ran something other than her mouth.

From William Jacobson: “In other news, the most intelligent, nuanced and intellectually adroit President ever — someone who can parse a sentence with his bare hands — still is pushing windmills and high speed trains as the key to our economic future. I’ll take a mere commoner as the next president, you can have Don Quixote.”

And he teaches law at Cornell.

If an Ivy Leaguer can get it, why not liberals?

Because they have this type of wishful thinking from Nobel economics laureate Paul Krugman:

People have been asking me about this article on the disappointing results of the Fed’s quantitative easing. What I would say is that QE2 has been implemented in such a way that there was no reason to expect a lot of traction on the economy; the only channel through which we might have had large effects was via expectations. And that part mainly happened before the policy actually began.

What is the Fed actually doing? It isn’t “printing money”; it has been buying long term bonds, paying for them by adding to (interest-paying) bank reserves. In effect, it has been borrowing short and lending long.

He is in denial deeper than Elton John was when he married Renate Blauel.

Nothing wrong with being gay.

Plenty wrong with being stupid.

Linked by Glenn Reynolds. Thanks.

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