Posted on 06/23/2011 5:11:51 AM PDT by 2ndDivisionVet
On June 15, the Bureau of Labor Statistics released the inflation data for May. If you didn't hear about the new data, you are not alone -- the mainstream media buried the story. Why? Inflation hit 3.6% in May, even though gasoline prices actually fell that month. Inflation has been rising since November, as shown in the graph below:
(CHART AT LINK)
These rising prices were largely caused by Federal Reserve Chairman Ben Bernanke's rapid expansion of the U.S. money supply, known as QE2 (Quantitative Easing 2). But inflation wasn't supposed to get this high. Back in November, Bernanke told his fellow central bankers that the Federal Reserve's Open Market Committee (FOMC) was aiming for an inflation rate no higher than 2%. Specifically, he said:
This policy tool will be used in a manner that is measured and responsive to economic conditions. In particular, the Committee stated that it would review its asset-purchase program regularly in light of incoming information and would adjust the program as needed to meet its objectives. Importantly, the Committee remains unwaveringly committed to price stability and does not seek inflation above the level of 2 percent or a bit less that most FOMC participants see as consistent with the Federal Reserve's mandate.
Bernanke is like a driver who steps on the brakes, then floors the gas pedal, then steps on the brakes again, then floors the gas pedal again. His tenure at the Federal Reserve has been marked by the erratic swings in the U.S. money supply, shown in the graph below:
(GRAPH AT LINK)
From May 2010 to May 2011, Bernanke had his pedal to the metal. He grew M1 (the amount of money in cash and in checking accounts) at a 13.4% rate. Due to lag time, this didn't get inflation climbing rapidly until February. Now that inflation has gotten started, it may be hard to stop because it can get a momentum of its own.
Back in November, Governor Palin took on QE2 and President Obama's defense of it. Her predictions have turned out to be correct. When making her case against QE2, she argued that it could cause inflation, but would not much help U.S. net exports and business investment, the two factors needed to grow the U.S. economy.
Indeed, worsening net exports (exports minus imports) have been keeping the United States stuck in its current economic stagnation. When imports go up relative to exports, Americans get more debt and lose jobs, whereas when exports go up, relative to imports, Americans get more income and gain jobs. The decline in net exports may be slowing or preventing the U.S. economic recovery.
Bernanke hoped that QE2 would weaken the dollar which would turn U.S. net exports around. But Palin predicted that any positive effects would be temporary. In November she wrote:
Will driving the dollar down in this way do anything to boost U.S. exports? The short answer is not really. A weaker dollar will temporarily boost exports by making our goods cheaper to sell; but inevitably other countries will respond in kind, triggering the kind of currency wars economists are warning us about.
Indeed, so far Palin has been correct. QE2's effect upon net exports appears to have been temporary. Although U.S. net exports worsened more slowly in November and December, they resumed their economy-sapping slide in February, as shown in the graph below.
(GRAPH AT LINK)
Business investment is another key to economic growth, it combines the money spent by businesses on new tools and structures, such as when businesses develop new energy resources or build new factories. When businesses spend money on tools and structures, they put Americans to work making the tools and building the structures. Later, the improved tools and structures give American workers more productive work, resulting in higher wages. Bernanke had hoped that QE2 would stimulate business investment. But, in November, Palin predicted that QE2 would have little effect upon business investment. She wrote:
Will QE2 then at least boost domestic investment? No, again. As I explained in my speech in Phoenix, the reason banks aren't lending and businesses aren't investing isn't because of insufficient access to credit. There's plenty of money around, it's just that no one's willing to spend it. Big businesses especially have been hoarding cash. They're not expanding or adding to their workforce because there's just too much uncertainty created by a lot of big government experiments that aren't working. It's the President's own policies that are creating this uncertainty.
Indeed, as the graph below shows, the rate of growth in real fixed investment slowed in the fourth quarter of 2010 and the first quarter of 2011, despite QE2:
(GRAPH AT LINK)
Palin argued that QE2 was a dangerous experiment that risked inflation. She urged Obama to instead balance budgets, cut taxes and reduce burdensome business regulation. In November, she concluded:
If the President was serious about getting the economy moving again, he'd stop supporting the Fed's dangerous experiments with our currency and focus instead on what actually works: reducing government spending and boosting business investment through good old fashioned supply side reforms (cutting taxes and reducing overly burdensome regulations). Simply running the printing presses in order to avoid paying off your debts is no way for a great nation to behave.
In May, she added balanced trade to her recipe for economic recovery. After meeting with Donald Trump, she said:
"What do we have in common? Our love for this country, a desire to see our economy put back on the right track," Palin told reporters. "To have a balanced trade arrangement with other countries across this world so Americans can have our jobs, our industries, our manufacturing again. And exploiting responsibly our natural resources. We can do that again if we make good decisions."
The bulk of the U.S. trade deficit (i.e., of our negative net exports) is with China. When Trump was testing the waters for a possible presidential run, he made President Obama's incompetent negotiations with China a cornerstone of his campaign. With Chinese aggregate demand growing rapidly and U.S. aggregate demand stagnant, economists would normally expect the Chinese trade surplus with the United States to be shrinking. But President Obama has let the Chinese government reduce U.S. net exports to China month after month, as shown by the new 12-month lows reached in recent months in the graph below:
(GRAPH AT LINK)
Obama negotiates with China from a position of weakness. He goes into each meeting ruling out the possibility of the U.S. putting tariffs upon Chinese products, even though the Chinese government has already placed high tariff and other barriers upon U.S. products. The U.S. need not negotiate from a position of weakness. Under world trade rules, it is entitled to impose trade balancing tariffs whenever it is running chronic trade deficits. Our proposal for scaled tariffs would let the United States (and any other country harmed by large chronic trade deficits) achieve higher net exports with or without the cooperation of its trading partners.
The mainstream media pretend that Palin is stupid. But she is actually blessed with a very rare commodity these days - economic common sense. She is the only potential presidential candidate currently advocating the three basic principles that would restore economic stability and long-term growth to the American economy: (1) balanced monetary growth, (2) balanced budgets, and (3) balanced trade.
Oh, no Mr Bill, Oh, No!
http://www.ronpaul.com/2009-05-12/ron-paul-warns-against-runaway-inflation/
In the grocery store last night I noticed that Folgers has gone to a 10oz “can” of coffee.
Gee...where have all the palinistas gone? Disappeared like vampires at sunrise.
Another “cute” non-response. Well, I quess you gotta go with what you have...
Bachmann agrees with many Republican economists who have joined Sarah Palin in urging Federal Reserve Chairman Ben Bernanke to cease and desist with “quantitative easing” — the $600 billion plan to buy government securities in an effort to spur the economic recovery.
Meaning, Bachmann only voiced this in response to Palin shining a light on it.
The Freedom's Lighthouse article regarding Romney was in reference to the "stimulus", not the Fed's QE program.
Granted, Paul was specifically referring to Fed policy, so you're 1-for-3.
2. Multiple posters swore that absolutely no other potential candidate ever spoke a word about this...just our dear saintly sarah.
No, I'm not. As usual, you misrepresent what I said. In fact, the same article indicates that Bachmann was well aware of the situation for some time and had called Bernarke in for testimony (which he refused) prior to QE1.
However, this wasn't something she was talking about in public until after Palin was.
2. Multiple posters swore that absolutely no other potential candidate ever spoke a word about this...just our dear saintly sarah.
Actually, I saw people certainly suggesting this, but open to credible references otherwise, which you attempted to provide (with the limited success I pointed out in my previous post).
And, again as usual, it is you who drag religious references in to discuss Palin, not the pro-Palin posters.
Yeah, he really slapped me down and put me in my place, didn’t he? .... uh, wait, what the ^*`k are you talking about?
Ron Paul warning about QE caused inflation!!!
/// Ron Paul has been a voice in the wilderness about some things. i admire that.
and Palin never said she was the first, or only one.
but, she did also stick her neck out, and go on the record, when many didn’t. and she was attacked by liberals for it.
i simply don’t understand why you seem to hate her so much.
can’t we be honest, and admit when a candidate we dislike, does something good, and admit when a candidate we DO like, makes a mistake?
I do not believe she is either qualified to be POTUS or electable. I do find the small cadre of insulting, occassionally obscene palinistas to be an unpleasant lot and more indicative of the low end of freepers, and I do like to push their buttons when they trot out this kind of "without palin we'd be lost" nonsense.
But hate palin?
As I have often pointed out on this board both Palin and Bachmann have been the most outspoken voices against Obama and the Democrats for the past couple of years.
QE2/inflation is just another example.
Clarification: I should have included "according to that article". I am still open to the possibility that Bachmann was indeed talking about this publicly at an earlier date.
So....you have several trucking companies working for you? Good for you. You must be very very busy. How do you find the time to come to FR to bash Sarah Palin every time her name is mentioned? Just wondering.
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