Newspaper Editorial Sarah Palin for Federal Reserve Chair

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The big question as Chairman Bernanke gets set for his first quarterly press conference is how Sarah Palin was able to figure out sooner than everyone else that the Federal Reserve’s campaign of quantitative easing wouldn’t work. Disappointment in the Fed’s policies is being reported this morning at the top of page one of the New York Times. It reports that “most Americans are not feeling the difference” from the Fed’s “experimental effort to spur a recovery by purchasing vast quantities of federal debt.” It reports that “a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.”

It’s a terrific story, and well-timed, given that on Wednesday Mr. Bernanke will break tradition and meet with the press. It is part of the Fed’s effort to get ahead of what is emerging as a public relations catastrophe, as gasoline is nearing six dollars a gallon at some pumps, the cost of groceries is skyrocketing, and the value of the dollars that Mr. Bernanke’s institution issues as Federal Reserve notes has collapsed to less than a 1,500th of an ounce of gold. Unemployment is still high. Shakespeare couldn’t come up with a better plot. But how in the world did Mrs. Palin, who is supposed to be so thick, manage to figure all this out so far ahead of the New York Times and all the economists it talked to?

She did this back in November in a speech at Phoenix, which the Wall Street Journal, in a laudatory editorial at the time, characterized as zeroing in on the connection between a weak dollar and rising prices for oil and food. “We don’t want temporary, artificial economic growth brought at the expense of permanently higher inflation which will erode the value of our incomes and our savings,” the Journal quoted Mrs. Palin as saying. “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.” Now here is the New York Times quoting a raft of economists who have reached the conclusion that Mrs. Palin’s warning was right down the line.

http://www.nysun.com/editorials/sarah-p ... fed/87317/

Looks like the left sorely underestimated Palin.

get rid of the whole damn thing

LOL!!

She probably talked to some economists that knew what they were talking about, rather than ones selected for ignoring economic realities in favor of supporting the New York Times' progressive party line. Not really all that difficult.

Well, she actually wasn't the only one saying it was a bad idea, the name Glenn Beck comes to mind too. I think it is more than her simply listening to economists (which I really doubt she did), it is basic common sense.

MMM has she been listening to Vince Cable by any chance? Cable talks economical sense considering he is an economist (Unlike the toff in Number 11) tho his foxtrot is crap.

Liberals have been claiming she is too dumb to even understand economists. Which goes to show Liberals have sorely underestimated her intelligence.

More power to her elbow then If only the Tory's over here have taken a few lessons in economics then there understand that there too heavy handed with the cutting knife.

[x] The newspaper's name contains the word 'sun'.

Sarah Palin may be pretty good at economics, but I would not want any politician in that job because the Fed requires a very elite league of financial expertise to manage that politicians do not specialize in. We need someone like Alan Greenspan back.

From the standpoint of economics, the tories' error was in declaring NHS off limits. From a political standpoint, though, I don't know if they had a choice on that.

One should never confuse fiscal policy and monetary policy.

These are two different policy levers with which the public sector can have an impact on a nation's economy.

The first is the policy around government revenue and expenditure, and it is clearly within the jurisdiction of the legislature. It is the legislature that has the power to levy taxes, duties, charges and fees, and it is the legistlature that gives spending authority to government.

The second, however, is the policy around how much currency there is in the economy at any given time, the method of that currencies issue, and what that currency represents. Monetary policy has two specific targets for its performance: inflation and unemployment.

It has become an article of faith among most economists that monetary policy should never be controlled in the same hands as fiscal policy. Government and the legislature should never, ever have the power to simply print more money to dig themselves out of a fiscal hole.

The policy motivation behind quantitative easing was a search for the remedy of slumping aggregate demand. When aggregate demand drops in an economy, then either prices fall, or production slows down, or both. (A significant school of thought suggests that a failure in aggregate demand was the primary cause of the Great Depression, although that is not without its detractors). The typical response from government was to embark on public spending (particularly on infrastructure) in order to maintain aggregate demand in the economy.

In the current political climate, there is little appetite for that kind of spending--but if the economy is to keep moving and jobs are to be maintained, there are only two levers available to the public sector--and if the fiscal policy folks won't do it, then it becomes incumbent on the monetary policy folks to do so. (This is exactly how Greenspan avoided a recession after 9/11, by the way...)

I am no fan of quantitative easing. Public sector spending acturally creates new demand--the government starts building roads, bridges and tunnels, airports and telecommunications facilities and there is a need for "bricks and mortar" and for labour. And, while this is done on borrowed money, it is repaid by the people who are actually making use of the infrastructure--so it is one of those situations in which public borrowing is a viable exercise.

Monetary policy does not create new demand in the same way--the central bank does not buy any goods or services with the money that it releases. Not that price stability in actual dollars is maintained because although prices are stable in constant dollars, the drop in the value of those dollars means that prices are falling in real terms. This avoids a deflationary spiral, since interest and investment activity are conducted in actual, rather than constant dollars.

I think it's a bit facile to suggest that Palin, Beck and their ilk were "right all along." The events in the Middle East have had a huge impact on the price of oil, and that has an huge knock on effect in prices in general. Frankly, I think the inflationary pressure would have been much, much worse had it not been for quantitative easing, and US exports would have been badly harmed by a high US dollar.

If by the youthanism of 'ring fenced' then yep, 'ring fenced' is just Tory newspeak for cut your cloth. The changes they plan on doing to the NHS is pissing of healthcare professionals (I know I talked to few about it) & the public. Just like another Tory youthanism 'The Big Society' the big load of BS I heard then again what you expect from toffs & tossers who talk out of there a***holes.

What will really & truly piss the Tory's off (I hope & wish it done's happen) is for Gordon Brown to become the head of IMF.

While government demand is in some sense "real", it doesn't necessarily increase aggregate demand. Absent use of monetary levers, the government must borrow or tax to support the spending. The lenders or taxpayers then have that much less money to lend or spend in the private economy. Thus, public sector spending often merely displaces private sector spending, with no or even negative effect on aggregate demand.


While the events in the middle east - including, I would note, the U.S. interventions there - may have increased the price of oil and thus prices in general, there is no way that quantitative easing reduced inflation. Quantitative easing directly increased the money supply - the quantity of dollars in circulation. That meant more dollars were chasing the same amount of goods. The result was inevitably a fall in the value of the dollar - which is to say, inflation.