Bernanke Delivers QE2 Last Rites for Dollar as Worlds Reserve Currency
By: Mike Whitney
Nov 07, 2010
Millions of Americans have no idea what Quantitative Easing is or how it will effect them personally. That’s why Wednesday’s announcement that the Fed will purchase another $600 billion in US Treasuries merely reinforced feelings of helplessness and a sense that government spending is out-of-control. Unfortunately, Ben Bernanke’s rambling explanation of QE2 in a Washington Post op-ed on Thursday only added to the confusion. The article is loaded with half-truths and omissions that are meant to mislead the public about how the program works and what the Fed’s real objectives are. It’s another missed opportunity by Bernanke to come clean with the people and let them know what policies are being enacted in their name. Here’s an excerpt from the article:
“The Federal Reserve’s objectives —- are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills…..Low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating. The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed…..the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.”
Bernanke mentions employment/unemployment 5 times in the first 3 paragraphs to give the impression that QE is about creating new jobs. But everyone knows that’s baloney. If Bernanke was really worried about jobs, he would have appealed to Congress for a second round of fiscal stimulus in his speech, which he didn’t, because he remains hawkish on deficits like his colleagues in the GOP-led congress.
Also, if QE2 is mainly about jobs, than why not settle on benchmarks to determine whether the program is successful or not? In other words, if unemployment is still hovering at 8 or 9% in June 2011, when the program ends, then we can assume that Bernanke was either wrong in his calculations or deliberately misled the public about what the program really does.