mick silver
7th December 2010, 01:48 PM
http://www.forbes.com/2010/12/01/ben-bernanke-quantitative-easing-economy-opinions-contributors-ralph-benko.html ... Is Ben Bernanke's second round of quantitative easing (dubbed QE2), meaning over half a trillion dollars injected into the financial sector, a calculated use of inflation as a broad-based bailout? Floyd Norris suggests so in his Nov. 25 New York Times piece "Gold Fever: Pondering the Causes." He writes:
[I]magine the late 1970s came back. We used to call that period "stagflation," and no one has fond memories of it. Those of us with money would be poorer, because the money would buy less. It would be even worse if we had lent the money for a number of years at the current low interest rates.
Yahoo! BuzzBut the borrowers would be much better off, and just now they are the ones in the worst trouble. People with homes that now seem to be hopelessly underwater would find they could sell and pay off the mortgage. Banks would discover they had fewer bad loans than they thought they did. Unemployed people could afford to move in search of work.
Norris' wistful hope that a dose of inflation will produce growth instead of stagnation romanticizes the abilities of the Federal Reserve (and very likely mirrors its thinking). But remember the 1970s? Jimmy Carter thrashed around fecklessly with a misery index of high unemployment and high inflation, blaming conditions on a "malaise" of the American people. The inflation rate produced by Carter's ( CRI - news - people ) early Fed was around 6% on its way to double digits. The Dow Jones industrial average stood stagnant in the 900s. (No typo.)
Pop culture-wise this age of inflation had us singing along to borderline nihilist classics. Remember "Don't Fear the Reaper," sounding like extolling joyous suicide? "Seasons don't fear the reaper/ Nor do the wind, the sun or the rain. We can be like they are." Recall "Dust in the Wind"? "All we do/ crumbles to the ground though we refuse to see."
Real-Time Quotes
12/07/2010 3:47PM ET
CRI$31.71-1.92%Get Quote
BATS Real-Time Market Data by XigniteBernanke is playing with fire. Congressional thought leader Mike Pence, influential popular commentators such as Sarah Palin and our world trading partners have reacted with outrage to Bernanke's QE2. Debasing the dollar may give the economy a cheap high. The hangover will be devastating.
[I]magine the late 1970s came back. We used to call that period "stagflation," and no one has fond memories of it. Those of us with money would be poorer, because the money would buy less. It would be even worse if we had lent the money for a number of years at the current low interest rates.
Yahoo! BuzzBut the borrowers would be much better off, and just now they are the ones in the worst trouble. People with homes that now seem to be hopelessly underwater would find they could sell and pay off the mortgage. Banks would discover they had fewer bad loans than they thought they did. Unemployed people could afford to move in search of work.
Norris' wistful hope that a dose of inflation will produce growth instead of stagnation romanticizes the abilities of the Federal Reserve (and very likely mirrors its thinking). But remember the 1970s? Jimmy Carter thrashed around fecklessly with a misery index of high unemployment and high inflation, blaming conditions on a "malaise" of the American people. The inflation rate produced by Carter's ( CRI - news - people ) early Fed was around 6% on its way to double digits. The Dow Jones industrial average stood stagnant in the 900s. (No typo.)
Pop culture-wise this age of inflation had us singing along to borderline nihilist classics. Remember "Don't Fear the Reaper," sounding like extolling joyous suicide? "Seasons don't fear the reaper/ Nor do the wind, the sun or the rain. We can be like they are." Recall "Dust in the Wind"? "All we do/ crumbles to the ground though we refuse to see."
Real-Time Quotes
12/07/2010 3:47PM ET
CRI$31.71-1.92%Get Quote
BATS Real-Time Market Data by XigniteBernanke is playing with fire. Congressional thought leader Mike Pence, influential popular commentators such as Sarah Palin and our world trading partners have reacted with outrage to Bernanke's QE2. Debasing the dollar may give the economy a cheap high. The hangover will be devastating.