Holtz-Eakin is correct

Reader comment on: Holtz-Eakin on QE2

Submitted by J.Johnson (United States), Nov 19, 2010 10:30

The most important thing Holtz-Eakin said, and which is demonstrably unquestionable, is that the U.S. is not in the midst of a "liquidity crisis." Bernanke seems to think that creating nearly a Trillion more dollars out of thin air will have a net beneficial effect on the economy, irrespective of any recent past evidence supporting such a conclusion. Indeed, recent past evidence strongly predicts that the long run effect of flooding the economy with yet another tsunami of new money will be harmful. Just look at the past three times it happened: Arthur Burns pumped the money supply way up prior to the 1972 elections so his man, Nixon, would have a good economy to run on. And, indeed, the economy in the fall of 1972 was pretty good, but was soon followed by inflation that prompted Nixon to impose (ineffective) wage and price controls, and eventually resulted in double digit treasury bill rates. After Volker finally fixed things, along comes Greenspan and his money machine to cause two bubbles, the first in tech stocks and the second in housing. And now comes Bernanke, first with QE1, which was so ineffective that he now brings us QE2. George F. Will, referring to the Federal Reserve in his latest column in the Washington Post as "the fourth branch of government" (where have I heard that before?), says that the Fed's dual mandates are contradictory and pursuing them has caused and will continue to cause the Fed to do things it should not do. Amen.

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