Of course, Sarah Palin is quite right in her concerns about the economic impact of more quantitative easing. At best, Ben Bernanke’s efforts may add a third of percentage point to GDP. Maybe. And at what cost? Bubbles in commodities and emerging markets, capital controls, currency interventions, further erosion of America’s role as an economic model. All for, as Palin puts it, “temporary, artificial economic growth.” Or as Kevin Warsh of the Fed puts it:
But if the recent weakness in the dollar, run-up in commodity prices, and other forward-looking indicators are sustained and passed along into final prices, the Fed’s price stability objective might no longer be a compelling policy rationale. … Overseas—as a consequence of more-expansive U.S. monetary policy and other distortions in the international monetary system—we see an increasing tendency by policy makers to intervene in currency markets, administer unilateral measures, institute ad hoc capital controls, and resort to protectionist policies. Extraordinary measures tend to beget extraordinary countermeasures. Heightened tensions in currency and capital markets could result in a more protracted and difficult global recovery.
Or as PIMCO’s Bill Gross puts it: “Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme. Public debt, actually, has always had a Ponzi-like characteristic.”