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To be a critic

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To be a critic

An illustrious group wrote an open letter to Ben Bernanke earlier this week. They opposed his quantitative easing initiative:

“We believe the Federal Reserve’s large-scale asset purchase plan 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.”

Other than to recommend that the Federal Reserve do nothing, this group really had little else of substance to offer. Of course, they did add:

“We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all of 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.”

What they really meant was that tax rates, government spending, budget deficits and regulations all should be reduced substantially. In other words, government should greatly scale back its involvement in the economy in every possible way. These proposals sound very much like the US Chamber of Commerce’s agenda for the new Congress. Who says you can’t get the government you pay for?

Thus, if we read between the lines, what these people (among them Michael Boskin, Hoover Institution at Stanford; Niall Ferguson, Harvard; Ron McKinnon, Stanford; and John Taylor, Hoover Institution) are saying is that government seems to be the root cause of all the economic problems facing the US. If government gets out of the way, then growth will take off.

What this group did not add to their statement were their recommendations at the time the financial markets were on the verge of a complete meltdown in mid-2008. Undoubtedly, some did support the initiatives of the Federal Reserve and the US Treasury at that time. But I suspect that the majority opposed these initiatives. For some inexplicable reason, many of them cling to the belief that markets function well on their own, and that the financial markets and the economy would have bounced back quickly without any government interventions.

Such views differ quite markedly from those of Warren Buffett who, in an op-ed piece in today’s New York Times, thanked the US Government for acting decisively to save the US financial system and economy in 2008:

“Uncle Sam, you delivered. People will second guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic – and, overall, your actions were remarkably effective…in this extraordinary emergency, you came through – and the world would look far different now if you had not.”

Who is right? Warren Buffett or the “illustrious” group? The US economy is still mired in sluggish growth. The US financial system is not entirely out of the woods. On whom would you bet now: Ben Bernanke or the “illustrious” group?

It is easy to criticize; it is even easier to make self-serving, vacuous proposals that superficially might sound good but lack any sound, logical foundation. Fortunately, this group has been allowed to wander around in the wilderness by the policy-makers in Washington.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.


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