Comments on: The politics of QE2 A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: okiebill Wed, 17 Nov 2010 15:30:47 +0000 It’s obvious why QE2 is necessary. Congress is gridlocked (already was before Nov 2). So, if Bernanke is a “Politician” because he wanted to try to address unemployment, slow growth, and a threat of deflation with the only weapon he has at his disposal, then I guess that makes him a “Politician” (as if that’s become a dirty word now). I, for one, am glad he is. I wish his detractors had some positive alternatives to offer.

By: Bob9999 Wed, 17 Nov 2010 15:24:19 +0000 It’s not clear what Allan Sloan means by “politician” except that he seems to be using it to mean someone who implements a policy Allan Sloan doesn’t like. Bernanke would be just as much a politician if he was pushing a policy of doing nothing, though Allan Sloan would not call Bernanke a “politician” because that would be the policy that Allan Sloan would prefer.

Look, Bernanke is an incredibly respected economist who has devoted a large part of his life to studying how the Federal Reserve responded to the 1929 economic crisis, which lasted throughout most of the 1930s. That’s the reason Bush nominated him to head the Federal Reserve in the first place; he has unique insights into Fed policy.

Bernanke has a thorough understanding of what the Fed did during the 1930s, in response to the 1929 crisis, and he has convincingly argued that a different set of decisions by the Fed would have made the Great Depression shorter. Bernanke developed of widely accepted mathematical models of what the Fed did in those days, and these models actually predicted the 2008 economic crisis. (That’s why we had the early 2008 Bush tax-rebate stimulus.)

Bernanke is an extremely respected economist with a background uniquely suited to leading the Federal Reserve’s response to the 2008 economic crisis. Bernanke’s theoretical models actually predicted the 2008 financial crisis in time, at least, for the government not to be completely surprised by it. No less a person than Warren Buffett credits Bernanke with successfully heading off a worse economic crisis than we are experiencing today.

Given all of that, with Bernanke’s understanding of the subject matter and his reality-tested views on how the Fed can affect the economy, Bernanke would probably view the do-nothing policy advocated by Allan Sloan as a policy of watching the economy go hopelessly down to tube into deflation and possibly depression. For Bernanke to do that, merely to avoid ruffling the feathers of the likes of Allan Sloan, would be a completely amoral choice.

And who is Allan Sloan, anyway? As far as I can tell, he’s a magazine editor. Let him limit his opinions to matters of layout and story selection, where his expertise lies. In the area of economic policy, he’s no more than an entertainer — telling his readers what they want to hear so that they renew their subscriptions. Who cares?

By: barrycooper Wed, 17 Nov 2010 15:01:26 +0000 The structure of the Fed is designed, specifically, and in the “brochure” selling it, to insulate it from political pressure. The Fed answers to no one. Bernanke cannot be countermanded. This policy cannot be stopped by legislative action–absent a Congressional restructuring of the Fed itself–Presidential order, or court decision.

The political pressure, to the extent it might exist, is precisely a questioning–long overdue–of a system in which very large, very rich banks, run by very wealthy men and women, have complete control over the creation and distribution of our national currency. They can literally write themselves checks. That’s what “Quantitative Easing” is: the Fed is writing checks to member banks, to take Treasure Bonds off their hands at a negotiated–not free market–price. They will then be free to spend that money on whatever their little hearts desire.

The whole system is corrupt, root and branch. The Fed has caused our currency to inflate over 2,000% since 1913. Given that inflation is intrincally wealth transfer, this means it has been a system in which the force of law has been used to enable the rich to get richer at the expense of the rest of us.

I deal with all this–including Keynesian economics–at length, here: tml

By: dWj Tue, 16 Nov 2010 19:23:39 +0000 I suppose on some level it has become “political”, in the same way that disparate impact is symmetric: backing off of QE2 at this point would very clearly be viewed as a political move, in a way that continuing it does not. I certainly don’t think the institution of QE2 was done for reasons that would meet any non-fatuous definition of “political”.

By: WHS Tue, 16 Nov 2010 16:38:33 +0000 Your suggestion only works if you assume that people are lining up in the Pro and Con columns because of good-faith policy disagreements. That’s manifestly not the case, at least not in Washington; only a handful of the relevant figures really understand how QE2 is supposed to function.

Domestically, it’s not anything specific to QE2 that’s led to controversy, it’s just Bernanke’s decision to do something — anything! — about the economy. As long as Obama is president and the employment situation sucks, Republicans have a perverse incentive to lambast any and all attempts to intervene: the public is disgruntled enough that a substantial portion of any critique will take hold. And once the Republicans have all lined up on one side of the fence, the Democrats feel compelled to line up opposite them.

It’s exactly the same dynamic that allows Republicans to reap electoral rewards from attacking the stimulus: the validity of the attack is utterly decoupled from its effectiveness. And it’s why any action Bernanke takes will become politicized: Washington isn’t interested in policy debates so much as it’s interested in finding cudgels with which to hit the other side.

By: Wismar Tue, 16 Nov 2010 15:43:47 +0000 Um, did you really think that Bernanke wasn’t a politician before this? I suppose you also think judges aren’t politicians and journalists are capable of objective reporting.