22 November, 2010

Sarah Palin Schools Ben Bernanke & The Wall Street Journal

This is a little dated. As I said in a previous post, I’ve been busy.

As you’ve no doubt heard by now, the Federal Reserve Chairman Ben Bernanke is preparing for his second round of “quantitative easing” to improve the economy. Basically, the reason why he and President Barack Obama’s (D-USA) administration is behind this is simple. They refuse to recognize the failure of Keynesian economics, and thus don’t understand why the economy is not recovering. Given that, this is the only bullet left in their gun, so they have to try it.

Their exact plan is to buy from $600 billion to $1 trillion in government securities. Of course, we don’t have the money to do this, so we’re just printing it. As I said, almost a year ago today, this is an exceptionally bad idea. At the time, I was discussing our historic debt and what to do about it. Here’s what I said then (emphasis added):

So the problem is the debt-to-GDP ratio. There are exactly four ways to reduce it. I suspect that we’ll have to do at least two of them.

1) Grow the economy

2) Cut spending

3) Increase taxes

4) Print money

I’m no Nobel Laureate, but if there’s another way, I sure don’t know about it.

Let’s assume that we’re not going to buy our way out of this by printing obscene amounts of money. You get double and triple digit inflation that way and destroy the economy. Generally, that’s a last resort. And usually fails in any event.

Everything Obama has tried has failed at #1. He’s utterly opposed to #2, and the economic situation and the new Congress makes #3 out of the question. We’re now left with #4, the one that I assumed at the time we’d not be stupid enough to attempt.

In Isaac Asimov’s Foundation, Salvor Hardin makes the following famous quote, “Violence is the last refuge of the incompetent.” I should write a whole series of posts about that and terrorism, but I digress. However, what Bernanke is planning here is a violent solution to our economic woes and demonstrates his incompetence and general unfitness for the position he now holds.

How does this relate to former Governor Sarah Palin (R-AK) and the WSJ? She lays it out in detail here.

We shouldn’t be playing around with inflation. It’s not for nothing Reagan called it “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” The Fed’s pump priming addiction has got our small businesses running scared, and our allies worried. The German finance minister called the Fed’s proposals “clueless.” When Germany, a country that knows a thing or two about the dangers of inflation, warns us to think again, maybe it’s time for Chairman Bernanke to cease and desist. We don’t want temporary, artificial economic growth bought at the expense of permanently higher inflation which will erode the value of our incomes and our savings. 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.

(read the whole thing)

China has also ridiculed the plan. Now, generally I’m not a globalist, and usually don’t care what other countries think of our policies. The reason is simply that countries act in their own best interest, and they ridicule our policies when they believe they impact their best interests. The problem is that generally it’s not worthwhile to assume that our best interest is the same as someone else’s, so listening to these whinings is self-defeating.

However, when we’re talking about a global recession, there are times that our interests converge. Germany, China, and everyone else who exports to us is interested in our economic growth. And they realize that this is not the best way to get there.

Unfortunately, the WSJ doesn’t get it either. And they don’t even read their own paper, hence the other part of my subject.

From the WSJ:

Unlike most U.S. economists and politicians, however, Palin tries to draw the concerns about quantitative easing to inflation today and falls short. She says, “everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher.”

Grocery prices haven’t risen all that significantly, in fact. The consumer price index’s measure of food and beverages for the first nine months of this year showed average annual inflation of less than 0.6%, the slowest pace on record (since the Labor Department started keeping this measure in 1968). Even if you pick a single snapshot — say, September’s year-over-year increase in prices — that was just 1.4%, far better than the 6% annual increase for food prices recorded in September 2008.

But also from the WSJ:

An inflationary tide is beginning to ripple through America's supermarkets and restaurants, threatening to end the tamest year of food pricing in nearly two decades.

Prices of staples including milk, beef, coffee, cocoa and sugar have risen sharply in recent months.

If you’re having problems reconciling the two articles, you’re not alone. You’re with Palin, as a matter of fact.

And, as Ed Morrissey notes:

The problem isn’t that this current inflation rate is somehow historically large.  It isn’t, as Reddy and the original WSJ article notes, although retailers are already having problems in getting consumers to purchase goods in normal quantities because of it.  The point Palin made was that taking a voyage on the QE2 would make a difficult issue for consumers and retailers much worse through the deliberate introduction of even higher inflation, an explicit motivation behind the Fed’s actions.

So Palin was right once again, and once again a reporter winds up with egg on face from starting out with an assumption that Palin couldn’t possibly know what she’s talking about.  Lather, rinse, repeat.

Many people are wondering whether Palin is going to run for President in 2012. Many people are wondering if she should, and think she’d be a bad choice for the GOP.

However, Palin continues to make her voice heard against the atrocities being planned and committed by this administration. It was through her efforts that the death panels (no, I’m not going to lessen that phrase by putting quotes around it) were removed from the disaster known as Obamacare. Time and time again she has forced the administration to respond to her and to the American public. And, as above, time and time again, they have underestimated her.

I would gladly post an article here about Romney or Huckabee statements, but they are startlingly quiet, only speaking out on shows like Face the Nation and Meet the Press when directly asked. It has been Palin who has consistently shown initiative and determination in fighting this administration. In short, Palin has shown real leadership, while Romney et al have shown the ability to go whichever way the wind blows.

Something to consider, just like Palin’s words on QE2.

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