As President Obama prepares for the G20 summit in South Korea this week, Sarah Palin is challenging the Federal Reserve’s monetary policy, which will likely be a key issue at the talks. On Monday, in a keynote address at a trade-association convention in Phoenix, Palin will urge Fed chairman Ben Bernanke to “cease and desist” his “pump priming.” The United States, she says, “shouldn’t be playing around with inflation.”
Here are snippets from Palin’s prepared remarks obtained by National Review Online:
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 more that I have seen her and heard her I like her for the next election. Sarah has principles and certainly she has her head on straight.
Reply to this commentLinkReport AbuseGo get 'em, Sarah!
Give them a swipe of the bear claw.
Good Lord, isn't anyone else worried about this type of reckless monetary policy besides her?
Reply to this commentLinkReport AbuseGee, why can't the so-much-smarter Vice Presidential candidate who won speak to the country like this?
Is it the bitterness? The clinginess?
Reply to this commentLinkReport AbuseThrough the process of fractional reserve banking (mother of all Ponzi schemes), credit expansion creates money out of thin air. After the debtor spends the new loan, this cash flow shows up downstream as revenues, profits, and increased equity on the balance sheet. Value grows within the economy that can be mortgaged for new loans, and thus an inverted money supply pyramid expands on a small foundation of base money supply. All of this happily continues until the debt to equity ratio becomes unsustainable ----- and then that process reverses.
Reply to this commentLinkReport AbuseI fully expect equal failure by economic conservatives of Austrian perspective when attempting to balance the budget because everyone is ignoring the "big elephant" in the room. This will lead to a debacle for conservatives at the next election because public sector spending does seem to act as a floor that prevents the economy from sinking further, but cannot bring about economic recovery. (Japanese experience)
The "big elephant,” that no one seems to be concerned about is debt-to-equity ratios that are normally way overextended at the end of a credit supercycle bubble.
The private economy, which represents 70% of demand, is under a heavy load of excess leverage. Deficit spending should have been directed at relieving the cash crunch in the private sector ----- for shoring up the balance sheet, spending and investing. It's likely there will be no serious recovery until this is addressed. The Japanese experience is one of failure with endless public sector spending, but not dealing with financial dysfunction. Unfortunately, the big government political class always prefers deficits by public sector spending which gives them economic control. Thus they own the responsibility of the current economic malaise.
Effective stimulus spending allows the private economy to replace debt with equity in the private balance sheet. This calls for large deficits by tax cuts, including temporary reduction or suspension of payroll taxes and tax rebates in serial installments --- until consumer confidence starts rising.
Why management of money supply should be shifted from monetary policy to fiscal policy to stop economic swings from credit bubbles. External Link
I'm sorry, but expecting Sarah Palin to have an understanding of international monetary policy is like expecting a chimp to understand nuclear weapon design. No rational person would waste the time with either.
Reply to this commentLinkReport AbuseI don't necessarily disagree with the content of "Palin's" statement, but come on...In what universe does she think she's qualified to comment credibly on the Fed's monetary policy?
Reply to this commentLinkReport AbuseAs a long time Republican and as one of the co-finance chairman for Reagan’s campaign in California in 1979-80 it is clear to me that Ms. Palin has no clue what Reagan stood for and his dedication to learning and his understanding of economics.
She speaks in catch phrases without taking the time to realize that the economic times are different today than they were in the 70’s and 80’s when Regan rescued the free world (not just America) from economic uncertainty.
Over the past three years ONE adult has saved the economy, Ben Bernanke. The Democrats have been in control of the Presidency, Congress and the Senate. They spend Trillions on “make work programs” designed not to boost the economy but to payback their special interest lobby.
Bernanke, decides to step in an use the only tools in his toolbox to accomplish several goals critical to the American economy and our way of life in the face of incredibly poor policy decisions by our elected officials.
Thank you Mr. Bernanke.
So what did quantitative easing accomplish? It keeps us out of deflation (see Japan Ms. Palin), it reduces the cost of our debit in the hands of foreign governments (see China Ms. Palin), it helps support American wages as they relate to consumer goods the middle class buys everyday.
Ms. Palin speaks of inflation… has she taken the time to realize that inflation is not our problem? Our American problem is deflation which as Japan is proving in recent times can cripple not just an economy but a way of life for decades. Please give us inflation, 5% would be terrific right about now, I would take 7% and be happy as well, but I am not picky.
Ms. Palin argues that the current QE policy is “temporary, artificial economic growth at the expense of higher inflation”, does she mean higher than our current deflation or does she see the economy through Cristina Romer glasses?
Ms. Palin speaks of oil at $87 dollars as if that is a problem caused by currency when it was over a $100 only a few years ago, and her comment “What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?” Does she even understand the current situation in the world today? Do you think China is lining up to buy Euro’s? China has been complaining in recent weeks because they have nowhere else to go and Bernanke’s policies are making our debit repayment less expensive to foreign governments.
Thank you Mr. Bernanke.
I realize that I am beating my head against a brick wall thankfully I have a right to do that in our right of center America.
Reply to this commentLinkReport AbuseI can see Zimbabwe from my house!
Reply to this commentLinkReport AbuseDrill Baby Drill!
That is the only way to get out of this hole.
Reply to this commentLinkReport AbuseA concise review of the miracle Reagan/Volcker pulled off in the early '80s is here (R. Samuelson):
http://www.thefreelibrary.com/Lessons+from+the+great+inflation%3A+Paul+Volcker+and+Ronald+Reagan's...-a0191010863
I was only 12 at the time, but I definitely remember that my aunts and uncles could not afford to buy a house because of the 20% interest rates. I remember the powdered milk, hot dogs for dinner, and putting in a wood stove in the late 70's to offset the high prices. I can only imagine what my parents must have been going through, but I do know they revered Reagan and never lost faith.
Even us mere mortals know that if you pay your Master Card monthly interest using your Visa card...while running up your MC balance...bad things are going to happen.
Reply to this commentLinkReport AbuseGood start, Mrs. Palin, very good start. Keep it up longer, louder, and more often, with more of the lurid details. Americans need to know what is being done to them, and fast.
Reply to this commentLinkReport AbuseGreat quote from the master of voo-doo economics, who tripled the national debt.
Reply to this commentLinkReport AbuseI really wish so many of the good guys would stop coming out against this. Just one objection to her argument: if this causes inflation, that means it's working. If it doesn't work, there's no inflation to worry about.
She also complains that the real problem is that banks don't want to lend, not that they have enough money. That's absolutely true, but she misses the point that this isn't about giving them more money to lend, it's about taking away one place that they usually park their cash so that their cost/benefit calculation of increased lending becomes more favorable to growth.
Also, the concern that inflation could get out of hand is plain nonsense, unless we're supposed to believe that the government has no tools at its disposal to slow down the economy. I can think of multiple such tools, although there are far less of them now than there were last Tuesday.
[Plus, the German's don't like it simply because they are afraid that it will provide a boost to US exports; another sign that it's likely to be successful.]
Reply to this commentLinkReport AbuseNot a huge Sarah fan but at least she is speaking out about the continued destruction of our economy by those who feel they know what they are doing when the record of central planners is all to plain. Stop all ready. Let the markets work. Your meddling is going to destroy this country if it has not already done so. Even you meddlers don't know the answer which should tell you all you need to know.
Reply to this commentLinkReport AbuseThere is a lot Sarah Palin has to say, and most of it is right on the square! The fact is that the Bureau of Engraving and Printing, U.S. Department of the Treasury, prints US Federal reserve Notes on a commercial contract to the Federal Reserve Bank, at about 3.40 cents per thousand bills, any face amount, as requested by the Federal Reserve Bank. These are not US Treasury Notes. The last time US Treasury Notes were printed for the US Treasury was 1962, then it was stopped with John F. Kennedy's death, 22 November 1963! Printing US Treasury Notes maybe the true reason for Kennedy's death! The US Bureau of Engraving and Printing also prints the US Treasury Bonds which the Federal Reserve Bank has a monopoly to buy from the US Treasury! US Bonds are authorized by the US Congress!
Reply to this commentLinkReport AbuseTreasury Secretary Tim Geinthner is selling US Treasury Bonds, authorized by Congress to the Federal Reserve Bank and doesn’t need to travel to any foreign country to sell them, Tim just makes a call to the Federal Reserve Bank chairman Ben Bernanke, over at the Federal Reserve Bank building. After the Federal Reserve Bank owns the US Bonds, Ben Bernanke can sell the US Bonds to Iran if he has too raise cash, per the requirement of the US Congress!
With the Federal Reserve Bank set to order the printing of $600 billion, from the Bureau of Engraving and Printing, in order to buy US Treasury securities, it is essentially funding the $3 trillion deficit for the next six months!
I am not a Ron Paulist (Smile) but y'know...when he's chair and actually gets legislation out there to audit the fed, I have a feeling Bernanke will start to hear the pitter-patter of the same footsteps that ran over the Pelosi House majority, don't you?
Reply to this commentLinkReport AbuseHow exactly is it possible to borrow our way out of debt? If this was actually possible, wouldn't we all have become filthy rich during the Bush era?
Reply to this commentLinkReport AbuseProsecutors in Europe have developed the habit of threatening anyone anywhere who they happen to disagree with. They claim some injury to someone under their jurisdiction, or they claim to be acting ex cathedra on behalf of some universal right. We are hopefully outraged by that overreaching. We should however consider that there are times when a local prosecutor should act to defend his people from a rapacious outsider.
The Constitution providers immunity for Congressman for their speech in the Chamber and their persons in transit. The law cannot provide the Functionary greater security then the Master. For lawful conduct in an official capacity a government agent can claim sovereign immunity. That should protect them from harassment by a private citizen. It should not make them immune from prosecution for misconduct.
It would please me if a State District Attorney in Ohio or Louisiana convened a Grand Jury and pursued Helicopter Ben Bernacke. He and Timothy Geithner, whose career should have ended with the Asian financial implosion 1997 although you would not know it from looking at his wiki page, are responsible for destroying real wealth and causing both real suffering now and making the nation vulnerable to foreign enemies.
The new Congress will have to focus on a set of goals. Among these should be determining the truth of what caused the financial crisis of September 2008 and whether there have been any improprieties in the response or subsequent actions of government officials. Another important area to investigate would be the degree of voter fraud in America and how it has impacted on elections. The hearings should be interesting. You may want to invest in popcorn futures.
Reply to this commentLinkReport AbuseFunny - Germany is saying the same thing.
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Reply to this commentLinkReport AbuseI couldn't agree more Sarah. Thanks to NRO for re posting here comments. Why is she the only one on the political stage that seems to share the concerns of average Americans getting KILLED by this economy? Could it be that she has been an average American. I am firmly in her corner.
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