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Sarah Palin: QE2 will sink the US dollar

Hey all you Palin-haters, how's this for a reasoned rebuttal to Barry and Ben's quixotic quest for Quantitative Easing, the sequel?

I'm deeply concerned about the Federal Reserve's plans to buy up anywhere from $600 billion to as much as $1 trillion of government securities. The technical term for it is "quantitative easing." It means our government is pumping money into the banking system by buying up treasury bonds. And where, you may ask, are we getting the money to pay for all this? We're printing it out of thin air.

Seem like a pretty fair assessment of the situation to me. Ben Bernanke is planning to buy back Treasury Bonds. Why? Because apparently nobody else wants them, especially when $105.50 today gets you $100 tomorrow.

The Fed hopes doing this may buy us a little temporary economic growth by supplying banks with extra cash which they could then lend out to businesses. But it's far from certain this will even work. After all, the problem isn't that banks don't have enough cash on hand — it's that they don't want to lend it out, because they don't trust the current economic climate.

Why should the banks lend the money out with no guarantee of repayment (can you say "mortgage bubble"?) when there's much juicier profits to be made in buying up other banks? (For example, on October 24, 2008, PNC Financial Services received $7.7 billion in TARP funds, then only hours later agreed to buy National City Corp. for $5.58 billion, an amount that was considered a bargain.)

And if it doesn't work, what do we do then? Print even more money? What's the end game here? Where will all this money printing on an unprecedented scale take us? Do we have any guarantees that QE2 won't be followed by QE3, 4, and 5, until eventually — inevitably — no one will want to buy our debt anymore? What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?

I think we're already more than halfway there to the Fed being the buyer of only resort. They wouldn't be pulling this stunt so soon after QE1 if there were any other viable options.

All this pump priming will come at a serious price. And I mean that literally: 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. And it's not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar — a direct result of the Fed's decision to dump more dollars onto the market — is pushing oil prices upwards. That's like an extra tax on earnings. And the worst part of it: because the Obama White House refuses to open up our offshore and onshore oil reserves for exploration, most of that money will go directly to foreign regimes who don't have America's best interests at heart.

Who's to say that Obama and Co. do have America's best interests at heart? Not me! I see one byproduct of escalating consumer prices as being the need for more people to turn to government assistance. What do Democrats and Progressives want most? More government involvment in everyone's lives! How do they accomplish that? By making it impossible for people to survive on their own. Then government can rush in to "help".

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.

Obama and Bernanke are playing with fire. I'd say Governor Palin's analysis is spot-on. Stock up on gold, oil, bullets and canned food. The arrival of QE2 signals the dawn of Weimar America.

(Via Memeorandum)

Posted at 09:53 by Chris Wysocki   [/economy]   Comments | Archived | Perm Link |
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