To the chorus of foreign finance ministers questioning the Federal Reserve's second round of quantitative easing, you can now add a figure less often called upon to parse monetary policy: former Alaska Gov. Sarah Palin.
According to prepared remarks of a speech she plans to give today in Phoenix, Palin calls on Fed chairman Ben Bernanke to "cease and desist" on the Fed's new effort -- commonly known as QE2 -- to create $600 billion and pump it into the U.S. economy over the next several months.
"Where will all this money printing on an unprecedented scale take us?" Palin asks, according to excerpts published by National Review Online. "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?... 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."
Inflation has actually been quite low in recent months, and deflation fears abounded earlier in 2010. In the past 12 months, the consumer price index rose just 1.1 percent -- notably below the norm for previous years.
Palin joins not only the ranks of foreign finance ministers such as Germany's Wolfgang Schaeuble and China's Zhu Guangyao who have criticized the Fed's decision last week to initiate QE2, but she also joins a growing chorus of conservative voices -- particularly in the tea party movement -- who have attacked the Fed's loose-money policy as well as its bailout efforts during the financial crisis. Rep. Ron Paul, the Texas Republican who made an unsuccessful run for president, wrote a hot-selling book called End the Fed and pushed legislation to expand congressional audits of the Fed. The Maine Republican Party adopted a platform that called for ending the Fed.
More establishment Republicans are criticizing the central bank, too.
“Diluting the value of the dollar by continually increasing the supply of money poses an incalculable risk," said Rep. Mike Pence, R-Ind., who chairs the House Republican Conference. "Instead, Congress needs to embrace pro-growth fiscal policies to stimulate our economy rather than masking our fundamental problems by artificially creating inflation. The American people deserve a government that protects the purchasing power of the dollar."
While foreign ministers have focused on the how Fed policy would affect the relative prices of imports and exports, Palin zeroed in on the effect a weaker dollar would have on consumer prices -- particularly for oil. She noted oil prices were at six-month highs, though they also continue to be far lower than they were before the financial crisis hit.
"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,'" her prepared comments say. "The Fed’s pump priming addiction has got our small businesses running scared, and our allies worried."
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