[Peter] Diamond's Exit A Warning To Fed Against QE3

Investors.com 'blogs ^ | Monday, June 6th, 2011 | Ed Carson

[SunkenCiv]

Don't even think about it, Ben. That's the message Capitol Hill is sending the Federal Reserve chairman regarding a possible third round of quantitative easing after Peter Diamond withdrew his nomination to join the Fed Board of Governors today.

The Nobel prize winner -- Bernanke was once a student of his -- certainly had the credentials. But the Senate had sat on his nomination for 14 months. Republicans objected to his support of the Wall Street bailouts and the Fed-s aggressive monetary policy, including its current "QE2" $600 billion Treasury buying program...

There's some speculation that the Fed could adopt a new round of asset buys to replace QE2 when it ends on June 30...

That’s just one reason why a new round of additional Treasury buys may be unlikely. Central banks in Europe, China, India and elsewhere are tightening, with many emerging markets grumble that the ultra-easy Fed has exacerbated their inflation concerns.

Within the Fed, several members have signaled they would oppose a QE3. Some fear the potential for higher inflation. Others wonder how much good yet another dose of monetary stimulus would do.

[SunkenCiv]

Click for a list of his papers.

[SunkenCiv]

Club for Growth Statement on the Peter Diamond Nomination
Club for Growth President Chris Chocola
6/06/2011

"Let's hope that President Obama's next nomination to the Federal Reserve is not a supporter of big government solutions and interventionist monetary policy."

Washington, DC -- The Club for Growth today released a statement in response to news that Peter Diamond has withdrawn his nomination to the Federal Reserve's Board of Governors.

In May, the Club for Growth issued a "Key Vote" alert opposing the Diamond nomination. This was the first time the Club for Growth had ever opposed a Presidential nomination.

"The Club for Growth will continue to urge members of Congress to oppose President Obama's failed economic policies," said Club for Growth President Chris Chocola. "We issued a Key Vote Alert on the Diamond nomination because he was a known Keynesian who believed in expanded government involvement in the economy. Republicans like U.S. Senator Richard Shelby should be commended for leading the opposition to Peter Diamond's nomination. Let's hope that President Obama's next nomination to the Federal Reserve is not a supporter of big government solutions and interventionist monetary policy, because that hasn't worked and won't work in the future."

[SunkenCiv]

Peter Diamond withdraws Fed nomination with scathing attack on GOP
Posted by Stephanie Condon 92 comments
http://www.cbsnews.com/8301-503544_162-20069273-503544.html

Republican Senator [Mike Johanns (R., Neb)] No Longer Backs Diamond’s Fed Nomination
By Luca Di Leo
May 11 2011
http://blogs.wsj.com/economics/2011/05/11/republican-senator-no-longer-backs-diamonds-fed-nomination/

[PA Engineer]

This was good news today. I still fear they will find someway around this and produce QE3 under another name. China not renewing their treasuries is an example of how they will play this. When the treasury notes come do, the FED will print money and loan it to themselves to pay for the obligations. I just see no other way they can weasel out of this with our current spending levels.

[familyop]

I’m sure that the government is just going to shrink itself, and that’s why there won’t be any QE3. ;-)

[SunkenCiv]

If the deficit ceiling is not raised, Pubbies will be blamed — even though there won’t be any significant consequences, because Zero, Pelosi, and Reid (the Gang of Three) won’t agree to spending cuts. Ever.

If the deficit ceiling is raised, Pubbies will be blamed. And the Demwits will use it as an alibi in the 2012. Pubbies up for re-election, who vote for an increase will be targeted in the primaries, because clearly, they’ve got to go.

IOW, Pubbies (even those who are turkeys with two left wings) will prefer to take the blame for something they SHOULD be in favor of, rather than the other.

Obamacare has to be repealed, if not now, then after 2013.

If it has to be repealed with some tax increases, so be it — the taxes will come off again in 2013. And be signed into law by Zero’s successor.

Zero can’t agree to repeal Obamacare, so there will be no tax increases, and spending cuts will be in the military, no question about it.

[Graneros]

“I still fear they will find someway around this and produce QE3 under another name.”

If they can get away with the name quantitative easing they can call the reckless policy of printing fiat money and giving to bankers, Wall Street, and political favorites anything they choose. They most certainly will too.

[kingpins10]

Ir doesn’t matter what he says. There has to be QE3 and probably even a QE4.

The gov’t has to keep borrowing and printing. Raising interest rates is completely out of the question. Why? Because the media has not been talking about all of the Americans that have been living on credit cards and other lines of credit. Higher interest rates would destroy these people. Not to mention, higher rates would drive the final nail in the coffin of the housing industry and even further slow auto sales and other products.

The party’s over.

[gogogodzilla]

And easy to get money (ie: low interest rates) coupled with the massive injections of cash into the economy is a recipe for inflation.

Inflation drives up the prices on everything, destroying those that have no more money to spend (ie: those using credit to buy everything).

Inflation raises the prices on everything, higher interest rates controls inflation and really just impacts any purchase that requires a loan.

So one makes it harder and harder to buy groceries, gasoline, clothes, movies... AND houses, cars, washing machines, etc. While the other just makes the houses, cars, washing machines, etc... more difficult to buy.

Neither is great, but which is less ‘bad’ than the other?