PALIN AND BECK RING THE QE BELL
by ilene - November 9th, 2010 11:52 am
PALIN AND BECK RING THE QE BELL
Courtesy of The Pragmatic Capitalist
The nonsense regarding the world’s greatest monetary non-event just continues to spiral out of control. Last week it was Glenn Beck pretending to know something about the monetary system and economics. This week it is Sarah Palin. In a talk today Mrs. Palin went on a politically motivated rant about government intervention and “money printing”:
“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?”
Glenn Beck made equally irresponsible comments last week. Why these people feel as though they are qualified to discuss monetary operations is beyond me. It would be like me walking into the Kennedy Center and telling the National Symphony Orchestra that they are playing the music all wrong (and I have not one ounce of musical talent in my entire body).
I won’t repeat the entire argument I have consistently made in recent weeks because I fear readers might bludgeon me with my keyboard, but let’s reiterate a few things:
- QE is NOT money printing. They are adding reserves to the banking sector and removing government bonds. Mr. Bernanke has explicitly stated this: