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Sawasdee Krup
A Country That Lost It's Soul & Put on a Fake Smile
Permalink : http://blog.nationmultimedia.com/dalmasian
Wednesday , November 17 , 2010
Must-read: An Open Letter to Ben Bernanke on QE2
Posted by Dalmasian , Reader : 2385 , 00:13:23  

From the Wall Street Journal Blog:

Today's must-read article is the hedge fund manager/economist op-ed letter to Ben Bernanke. The letter comes from the conservative side of The Street and is essentially an exhortation against the purchase of another $600 billion in bonds (QE2).

Web Link:  http://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/

This letter was signed by several economists, along with investors and political strategist, most of them close to Republicans:


We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

Cliff Asness
AQR Capital

Michael J. Boskin
Stanford University
Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)

Richard X. Bove
Rochdale Securities

Charles W. Calomiris
Columbia University Graduate School of Business

Jim Chanos
Kynikos Associates

John F. Cogan
Stanford University
Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)

Niall Ferguson
Harvard University
Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas
Manhattan Institute & e21
Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant
Grant’s Interest Rate Observer

Kevin A. Hassett
American Enterprise Institute
Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog
The Hertog Foundation

Gregory Hess
Claremont McKenna College

Douglas Holtz-Eakin
Former Director, Congressional Budget Office

Seth Klarman
Baupost Group

William Kristol
Editor, The Weekly Standard

David Malpass
Former Deputy Assistant Treasury Secretary (Reagan Administration)

Ronald I. McKinnon
Stanford University

Dan Senor
Council on Foreign Relations
Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle

Amity Shlaes
Council on Foreign Relations
Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer
Elliott Associates

John B. Taylor
Stanford University
Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)

Peter J. Wallison
American Enterprise Institute
Former Treasury and White House Counsel (Reagan Administration)

Geoffrey Wood
Cass Business School at City University London

A spokeswoman for the Fed responded:

“As the Chairman has said, the Federal Reserve has Congressionally-mandated objectives to help promote both increased employment and price stability. In light of persistently weak job creation and declining inflation, the Federal Open Market Committee’s recent actions reflect those mandates.  The Federal Reserve will regularly review its program in light of incoming information and is prepared to make adjustments as necessary.  The Federal Reserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment.  In particular, the Fed has made all necessary preparations and is confident that it has the tools to unwind these policies at the appropriate time. The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own.  That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.”

See related article: Fresh Attack on Fed Move


--  Dalmasian

Read comment

comment 18
Alien date : 21/11/2010 time : 04.34

Pomjuk - you never addressed the question of "Who is going to pay all this borrowing back"? In you latest answer, you state we have a choice of borrowing or higher taxes. I beleive the choice is a combination of slightly higher taxes and REDUCED SPENDING! Last night on TV, Obama was happy as a pig in shit because he is going to expand the "defensive missile" system over Europe. Who gives a shit. If I want to hire a security guard for my house or neighborhood, I have to pay him. Let the Europeans pay for their own security (for once!). How is paying for the security of Europe, while they are cutting back on their defense spending in the meantime, going to help the U. S.? I think you get your economic news from Democrat sound-bites! Why is Germany, Japan, China and every other nation with half a brain telling the U. S. to get its' economic act in line? Why did all of the G20 nations refuse to go along with Obama's continued and increased spending plans during the meetings in Toronto and the latest in Korea? The only ones I know pushing higher government spending now are the Democrats (and not even all of them), government unions and you. I think you are on the wrong side of this issue.
comment 17
Pomjuk date : 19/11/2010 time : 21.26
Windy's number one fan 

Alien: Benanke came on TV yesterday to urge the congress to increase spending otherwise face Japanese type of decade long of high unemployment.

Let's stop being a slogan economist for a moment and think. The government only has two choices for the sources of income. Taxation or borrowing. Must choose one; either higher taxes or borrowing. At the moment the government can borrow the rate of 1.17% for 5 yr. Isn't that a no-brainer?
comment 16
Pomjuk date : 19/11/2010 time : 21.24
Windy's number one fan 

Alien: Benanke came on TV yesterday to urge the congress to increase spending otherwise face Japanese type of decade long of high unemployment.

And the government only has two choices for the sources of income. Taxation or borrowing. Must choose one; either higher taxes or borrowing. At the moment the government can borrow the rate of 1.17% for 5 yr. Isn't that a no-brainer?
comment 15
Pomjuk date : 19/11/2010 time : 18.07
Windy's number one fan 

Alian: Most people look at the national debt as a percentage of the GDP. If the GDP is growing at the rate faster than the rate of growth without bollowing, then borrowing should not matter; especially when the US goverment can borrow at such low rates.

click here >>--> http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml
comment 14
Pomjuk date : 19/11/2010 time : 18.06
Windy's number one fan 

Alian: Most people look at the national debt as a percentage of the GDP. If the GDP is growing at the rate faster than the rate of growth without bollowing, then borrowing should not matter; especially when the US goverment can borrow at such low rates.

click here >>--> http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml
comment 13
Alien date : 18/11/2010 time : 23.21

Pomjuk - if government debt is good, let's get to the crux of the matter. Who is going to pay it back? Right now we're on our grand-children, leeching a bit into our great-grandchildren. I guess we can borrow more and indebt (and impoverish) our great-great-grandchildren. Live for today!
comment 12
Pomjuk date : 18/11/2010 time : 17.40
Windy's number one fan 

Alien: Krugman is not one of “A FEW” who claim that Keynesian is the answer to the “CURRENT” economic problem??? Many economists and even many of the self-proclaim supply sided economists agree that the economy needs to be stimulated on the demand side. If one agrees that the economy needs to be stimulate with a stimulus package, one basically agrees with the Keynesian type of theory.

Supply sided economics says that by reducing the tax rates and capital gain tax; will create greater supply that will reduce the price and there is no consequence to tax revenue. That believe have long been disapproved by the congressional budget office that it is an ill-conceived notion.

Government debt is good” I agree with that for an extent, say if the trend of the economic growth is currently at 2.5% annual rate (without borrowing), by borrowing the government is able to stimulate the economy to grow at the rate of 4.5%. In 5 years a $100 million economy would have become a $122.5 million economy, instead of a $112.5 economy (without borrowing). The national is debt paid for by the greater rate of growth of the economy.

Krugman is a proponent of housing inflation? That is pure silly.

Government can create wealth by printing money? That is a another silly thing you say Krugman said. I have to look at the whole context. We are talking about a Noble price winner here here not an undergrad economics student. The goal for the QE2 is to flush out the investors from treasury market into the other asset classes not to create wealth, I know that and I am not even an economics major, Krugman has to know that.

If you’re really following Krugman you’ll know that he can careless about politics he is not running for any political office.
comment 11
happyjack date : 18/11/2010 time : 02.23

Working whilst others get Drunk,or Sleep I've allways found works best
comment 10
happyjack date : 18/11/2010 time : 02.20

The way to achieve wealth,is to ignore Adviser's.Ask Bill Gates,and Richard Branson.
comment 9
Alien date : 18/11/2010 time : 00.45

Pomjuk - Paul Krugman is one of the few who still claim that Keynesian progressivism is the answer to America's (and Europe's) problems, not their cause. He is not for higher taxes on the rich - he is for higher taxes on EVERYONE! He has deyied that past tax cuts (JFK, R. Reagan) stimulated the economy. He was a proponent of "housing inflation", which happens to be the main cause of our current economic difficulties. He has also claimed that government debt is good (funny, nearly everyone of the other G20 countries are saying our debt is causing problems). He also stated that Obama's economic policies would keep unemployment below 9%. As you know, the real unemployment rate in the U. S. is now widely agreed to be in the vicinity of 17 - 18%. Krugman claimed in one column that government can create wealth by printing more money. What a joke! So, if you believe that government is the answer to everything and they should take as much of your money as neccessary to grow, yes, Krugmen is the man for you. I really don't give a shit that he got a nobel prize. Looking at other people who have received one kind of diminishes the honor. Following are a few select quotes from notable people about Mr. Krugman (who, by the way, shut down his own blog since some of the bloggers were winning economic arguments too often in disputing his contentions).

For example, Robert Barro, the distinguished Harvard economist, noted that Krugman "just says whatever is convenient for his political argument. He doesn't behave like an economist." The New York Times ombudsman Daniel Okrent observed that Paul Krugman has "the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults." James Taranto at the Wall Street Journal, after listing the falsities in Krugman's latest piece on climate last week, hazarded that perhaps "Krugman makes himself ridiculous merely to make our job easy." (American Thinker - Nov. 17, 2010).

Please note that the Obudsman for the N. Y. Times is from the same paper Krugman publishes his column.

Finally, don't forget that Krugman collected $50,000 from ENRON to spruce up their image. How did that work out?
comment 8
lonewolf date : 17/11/2010 time : 21.44

The assumption that any economist is not fundamentally a conservative, especially a Nobel winning economist, (irregardless if he/she is a Keynesian or from the Chicago School) is antithetical to the academic discipline of economics. Whether or not one agrees with their developed theories or solutions to economic maladies is a separate issue. But in all my years of working with universities I have yet to meet an economist without a basic conservative foundation from which he/she has evolved.

Paul Krugman has been unpopular in some Republican circles because he has criticized the weak governmental response to non-existent market ‘demand’ and he vehemently opposes tax breaks for the ultra-rich. The US economy is now consumer driven and if there is no demand from the private sector--as a consequence the public sector must encourage demand. As previously mentioned I just finished reading a great book by another economist (not a Nobel winner however) former Secretary of Labor Robert Reich. His book Aftershock expands upon Krugman’s perspective with easily obtained public data which has demonstrated that since the days of Reagan the Middle Class wage earner has seen his/her salary in the US steadily decline as the economy has grown and as the top 1% of income earners have increased their income exponentially. The result is fewer dollars going into the national economy creating the problems we are now facing.

This point has also been supported by another Nobel prize winner (I can keep listing several other Nobel winners in Economics who also mirror much of what Krugman has stated) Joseph Stiglitz in his recent book Freefall: America, Free Markets, and the Sinking of the World Economy, has stated that because the Middle Class has not had its income increase at even a sustaining rate, they have used the equity of their homes for the past decade to try to keep up with the increasing costs of living in the US. And we know the results of that.

And to the confusion and public dismay of many Republican leaders the general of President Reagan’s budget, David Stockman, a noted conservative Republican economist has also voiced support for Krugman’s perspective on tax cuts for the rich.

In a recent radio interview he stated the following:
RAZ: You seem to suggest that many of our economic troubles are the result of Republican economic policies over the past few decades. You are a Republican. You are a conservative. Why do you think Republicans are largely to blame?

Mr. STOCKMAN: “Because the Republicans abandoned their old-time fiscal religion in favor of two theories, which I think are now proving to be both wrong and highly counterproductive and damaging. One was monetarism, which said let the dollar float on the international markets. Let 12 men and women at the Fed decide whether to raise or lower interest rates, and use the Fed to try to run this massive economy. What they've done instead is run the printing press; they've flooded the world with dollars. The whole monetarist policy has been a mistake.
The second thing was the perversion of supply side. Yes, there was a good idea that in certain circumstances, lower tax rates will encourage economic activity and savings. But when you make it a religion, when you make it a catechism and you say you cut taxes no matter what the circumstance, what the season, what the condition, then I think the whole idea has been perverted. By getting off track over the last 30 years, the Republican Party has basically given up its historic view that the key thing was financial discipline, financial responsibility, and that we had to live within our means. Today, we have two free lunch parties and as a result, we're borrowing ourselves into grave danger with each passing month and year.

RAZ: Now, Republicans - David Stockman in the Senate, led by, obviously, the Minority leader, Mitch McConnell - they say they're simply following, you know, the Reagan philosophy of supply-side economics, a policy that you pushed. Do you think they're being disingenuous?
Mr. STOCKMAN: “Utterly disingenuous. I find it unconscionable that the Republican leadership, faced with a 1.5 trillion deficit, could possibly believe that good public policy is to maintain tax cuts for the top 2 percent of the population who, after all, have benefited enormously from this phony boom we've had over the last 10 years as a result of the casino on Wall Street.”

And finally watch this simple but utterly effective cartoon talking about the Fed’s latest project.

comment 7
Pomjuk date : 17/11/2010 time : 20.15
Windy's number one fan 

What's your point Alien?

Click here >>--> http://nobelprize.org/nobel_prizes/economics/laureates/2008/press.html
comment 6
Alien date : 17/11/2010 time : 13.25

Paul Krugman......now there's one of the Nobel Prize winners who did not win because of his politics.

Ever read any of his dribble?
comment 5
happyjack date : 17/11/2010 time : 05.20

There's too many Chiefs, and not Enough Indians, around this House.How someting so simple needs so many overpaid talking heads to add up profit m loss beats me...Your FIRED
comment 4
wch date : 17/11/2010 time : 03.58

G20 agreed on not-adjusting artificial exchange rates and Obama's are confident that 600bln new paper money issuance would not violate this accord. And, more importantly I agree on Obama's.
Most of G20 had earlier more issued openly (UK), secretly (Japan),,,,,,but their economies are picking up so far.
comment 3
pedxs date : 17/11/2010 time : 03.04

This letter was signed by several "second-rated" economists.
comment 2
Pomjuk date : 17/11/2010 time : 01.48
Windy's number one fan 

Robert Reich was on CNBC last night attacking a supply sided voodo economist.

Must read >>--> http://zfacts.com/p/318.html
comment 1
Pomjuk date : 17/11/2010 time : 01.43
Windy's number one fan 

A reply from a Noble Price winner Paul Krugman

Click here >>--> http://krugman.blogs.nytimes.com/2010/11/15/liquidationists-of-the-world-unite/
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