The winger logic this morning goes something like this:
- The NY Times notes that ordinary Americans have not really benefited much from Helicopter Ben's QE2 program.
- Therefore, this is proof that QE2 has failed.
- Sarah Palin said QE2 would fail.
- Therefore, given 2 and 3, Sarah Palin is the smartest person on Earth.
No, really.
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.
No really, she's a visionary genius.
Will any of this bring some humility to the Fed and its chairman? It will be something to watch for in his first big press conference Wednesday. No doubt it will be one of the most crowded press conferences in recent memory, and there will be lots to ask about. But one of the questions will be how in tarnation Mrs. Palin figured it out so far ahead of everyone else.
The
usual supplicants are crowing, in awe of Sarah Palin's supreme intellect.
But here's what I said almost six months ago:
I'm a Keynesian, but I think this is bad Keynesian policy. It's certainly not the best way to stimulate the economy. It is the best way for the banks to make a hell of a lot more money to sit on and not invest in workers and capital, and unless the banks loosen credit, there's not going to be anything useful out of this. It's trying to water your crops by blowing up the reservoir dam. You will get water to the crops, it just might take your farm with it.
The problem is the more useful ways to stimulate the economy have been summarily rejected, blocked, and killed by the GOP. That will not improve in the next two years, so the Fed has to step in.
However this has got to be the most painful way of doing it...short of you know, doing nothing at all. And we've got nothing else to try.
Investors want to borrow money cheaply and then get a high rate of return for it. Since interest rates are near zero, investors are borrowing that money from the Fed cheaply and plowing it into commodities: wheat, corn, oil, silver, gold. This is bad for consumers as prices for those go up, but they are an excellent rate of return for investors.
And since the GOP has blocked literally everything else the government can try that would be remotely stimulative, we're left with literally the worst option of the lot. Surprise, it's not working very well. It was a long shot at best and all it ended up doing was feeding more Big Casino games that would hurt the American people. Everyone bet commodities futures would go up...and wow, they did! Shocking, I know...it's called a "speculative bubble." The markets loved it. It did nothing for 90% of America other than make food and gas prices go up.
Any actual stimulus plan would have been killed in Congress. When Obama and the Democrats had the chance to do a real stimulus plan, they punted.
And if figuring out that wasn't going to work real well makes Sarah Palin smart, that makes me Einstein having Socrates' babies. What would Sarah Palin have done instead? Well...nobody seems to have an answer for that, least of all Sarah Palin and her supporters.
Oh wait, we know exactly what she would have done, cut taxes on the rich and wait for it to trickle down to the rest of us. We tried that, of course. It was called The George W. Bush Years. You see where that got us. And yet,
the fiscally responsible plan is completely ignored by everyone.
Funny how that works.