Fresh Attack on Fed Move (Economists, Lawmakers Call for Abandoning $600 Billion Bond Purchase)

WSJ ^ | 11/15/2010 | PETER WALLSTEN & SUDEEP REDDY

[Qbert]

WASHINGTON—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.

"The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment," they say in an open letter to be published as ads this week in The Wall Street Journal and the New York Times.

The economists have been consulting Republican lawmakers, including incoming House Budget Committee Chairman Paul Ryan of Wisconsin, and began discussions with potential GOP presidential candidates over the weekend, according to a person involved.

The increasingly loud criticism of the Fed comes as some economic officials outside the U.S. are criticizing the central bank's move to effectively print money, which has the side effect of pushing down the dollar on world currency markets. President Barack Obama last week defended the Fed. The move to buy more bonds, known as quantitative easing, "was designed to grow the economy," not cheapen the dollar, he said.

[Snip]

"Printing money is no substitute for pro-growth fiscal policy," said Rep. Mike Pence, an Indiana Republican who has been privy to early discussions with the group of conservatives rallying opposition to the Fed plan. He said the signatories to the letter "represent a growing chorus of Americans who know that we should be seeking to stimulate our economy with tax relief, spending restraint and regulatory reform rather than masking our fundamental problems by artificially creating inflation."

[EBH]

Lalalalalalala.....

Whistling past the graveyard....

Can you hear us now?

Didn’t think so.

[lurk]

This silly bunch thinks Bernanke and the President are listening.

[cripplecreek]

Its kinda funny. I’ve been watching a show about counterfeiting on the History channel this morning. Hitler printed British pounds in an attempt to destroy the economy of Great Britain.

[agere_contra]

Hitler printed British pounds in an attempt to destroy the economy of Great Britain.

His mistake. Our hyper-stimulated economy absorbed those fake pound notes and became unstoppable, LOL.

You make a good point. What Hitler tried to do as a deadly weapon of war, Bernanke is now attempting to use as a deadly weapon against the American middle-class.

[henkster]

Everyone is blasting the Fed over this, and they are missing the point, or target, of the criticism. The Fed has no choice but to conjure up $600 Billion, and will have to conjure up a lot more in the next year.

Our government is spending money like there’s no tomorrow (in fact, by spending so much money they are guaranteeing it). There isn’t enough credit on foreign markets to buy up $1.4 Trillion every year in bonds. So, in order to cover the deficit, the Fed is printing money.

It’s not their fault; the fault lies in the teleprompter puppet president and the socialists in Congress. They’re the ones writing the checks and the Fed has to cover them somehow.

Right now, printing money is the only way to do it, and as stated, they just don’t have any choice.

[Sacajaweau]

The G20 folks also had much to say about this. Let’s be honest, Obama got his a** kicked on that trip.

[Jack Black]

Excellent point, great post. So, lets think this trough. If the Fed doesn't print enough money to buy $600 billion in Treasury notes then who is going to buy those T-bills to keep the government afloat? If we have to go to market we're not going to get away with the very low interest rates we're paying today, to make that much debt attractive the rates will have to go way up, which means we'll need even more borrowing in the future.

We can have austerity, or inflation via monetization (what Bernanke is doing) or outright debt repudiation (ala Argentina), or some combination of all three. But we can't have "nothing". Austerity is being tried with a vengence in Ireland, and not working so well. The problem with austerity is that it shrinks the economy and lowers tax revenue, so it's a vicoius cycle too. I say we get right to the main act and start repudiating this debt.

[agere_contra]

Nobodys buying the T-Bills now. America is already running on air.

Repudiate US debts? As well as adding a zero to future credit charges repudiation would also create the most monstrous moral hazards. Hundreds of them! The US isn't Argentina or Mexico: repudiation of US sovereign debt would color every Anglophone transaction on earth and alienate every creditor country.

And you'd still end up with crushing inflation - a Government that repudiates its debts isn't going to stop spending its way to oblivion.

I'd also expect possessions and citizens overseas to be distrained upon.

Example: China could promptly repossess all US-owned and US-citizen-owned assets on Chinese soil. When you complain, the Chinese would simply say "you owe us twillion dollar, round-eyed dogs: pay up or put up!".

[darth]

I have a very savvy friend who has made a killing in bonds over the past two years.

He said yesterday that he thinks the bond bubble is going to pop soon.

He has never been a survivalist or chicken little, but now he is stocking up on food and ammo. Says he’s actually scared.

[oneolcop]

As a matter of fact, the Norks and the Iranians have been printing virtually perfect counterfeit US Treasury Notes for years. That's why the US has changed the design of the notes. Oh, and by the way, one nation's counterfeiting of another nation's notes is is an act of war.

[The Comedian]

The Federal Reserve's latest attempt to boost the U.S. economy

First error. They are trying to increase inflation, specifically, re-inflate the real estate bubble. That does not equate to "boosting the US economy", it just means saving the banks again.

is coming under fire from Republican economists and politicians,

Actually it's Austrian School economists and anyone, and I mean *anyone* who understands the issues of a fiat currency. I can only dream that it would be "Republicans".

threatening to yank the central bank deeper into partisan politics.

The "central bank" is off into the far Left hinterlands of Keynesian moonbattery, and any criticism of its idiotic murder/suicide currency policies is "partisan" only in that it is pro-American dollar survival.

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[Hoodat]

The only way they can achieve this is to immediately initiate $600 billion in spending cuts. The ONLY reason the Fed did what it did is because the government needs the cash to continue functioning. It has nothing at all to do with stimulating the economy.

Eliminate $600 billion in planned spending over the next few months, and the Fed can erase the $600 billion monetary expansion.

[The Comedian]

"Economic Holocaust" ping.

Moderate (but increasing) volume ping list.

FReepmail me if you want on or off
The Comedian's "Economic Holocaust" ping list...

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[DHerion]

I think you are right about why the Fed is printing money. Banks are already sitting on a trillion in reserves. What’s another 600 billion. The fed is doing this to buy the debt. On the other hand there is a dark cloud for Republicans if Ben were to cancel this move. It could very likely push the country into a deflationary spiral, run up unemployment much higher in the short term - Obama could fire back as the economy tumbles that we were thisclose to getting out of this until the ‘crazy tea party/republicans’ forced us to change course. Obama could possibly get reelected and who knows, the Democrats could storm back into Congress in 2012. Very tricky situation.

[Quix]

thanks.

[Lurker]

This is going to end badly. Very, very badly.

[FromLori]

The Fed has a choice just say NO they are supposed to be independent and are proving they are not. They are scratching the liberals backs and allowing the spending while at the same time giving gifts to the banks with our tax dollars and as a result causing a huge back door tax increase in the form of inflation to American citizens.

The way it works is the banks sit on the money and earn interest and we foot the bill so it’s a win win for leftists and the crooks we already bailed out. The crooks that supported obama in the first place like Jamie Dimon, Lloyd Blenfein, Warren Buffet, etc. they win and the leftists win.

[FromLori]

Pretty interesting movie

“The Secret Of Oz” - The Truth Behind The Modern Financial System, And The Money-Political Complex

http://www.zerohedge.com/article/secret-oz-truth-behind-modern-financial-system-and-money-political-complex

[kevao]

It has nothing at all to do with stimulating the economy.

+1. There are over US$1 trillion in excess reserves sitting idle in the banking system. Adding another US$600 billion to that won't do anything to "stimulate" the economy.