Palin Lashes Out At Bernanke, Urging Him To 'Cease And Desist' Purchase Of Treasuries
NEW YORK -- In an unusual detour, Sarah Palin waded into monetary policy Monday, lashing out at Federal Reserve Chairman Ben Bernanke and urging him to "cease and desist" his attempt to jumpstart the economic recovery by committing to buy up to $900 billion in U.S. government debt.
In prepared remarks to be delivered to a trade association in Phoenix, the former Alaska governor and vice presidential candidate said she is "deeply concerned" with the Fed's plan, announced last week, arguing that the nation's central bank would be "printing [money] out of thin air" and that it is "far from certain" to "even work." The argument was unusual in that monetary policy is supposed to be immune to political pressure.
The economy, though growing, remains sluggish as unemployment hovers near 10 percent and prices stagnate. Hoping to reignite the recovery, the Fed committed last week to purchasing hundreds of billions of dollars in Treasuries in hopes that the extra cash it pumps into the
economy will stimulate inflation, the broad increase of prices, which would then lead consumers and businesses to resume their pre-recession spending.
The controversial move has divided the Fed, with one side arguing that it could lead to unintended consequences, like asset bubbles or runaway inflation, and the other saying that the risk of not acting, a Japan-like era of no growth, is too large. With policy makers in Washington unable to develop coherent fiscal policy, it's largely up to the Fed to rescue the nation from its worse economic malaise since the Great Depression, economists and commentators say.
Palin, whose monetary policy credentials could not be deduced Monday, addressed one side of the issue in what is likely to be an appeal to the Tea Party movement, which is deeply suspicious of the central bank.
"The Fed hopes doing this may buy us a little temporary economic growth by supplying banks with extra cash which they could then lend out to businesses," she will say, according to remarks leaked to The National Review, a conservative publication. "But it's far from certain this will even work."
Noting that banks have abundant liquidity -- depositories have about $981 billion in excess reserves stashed at the 12 regional Fed banks around the country, Fed data through September show -- Palin will say that they don't want to lend it out "because they don't trust the current
Palin adds that, if it doesn't work, the Fed runs the risk of printing so much money that "no one will want to buy our debt anymore."
The risk of inflation is too large, Palin will argue. She notes that prices have already "risen significantly" as "everyone who ever goes out shopping for groceries knows." She adds that the price of oil is also rising, according to her prepared remarks, which she links to the Fed's asset purchases and "decision to dump more dollars onto the market."
Palin then will argue that "the worse part" of this is that the White House "refuses to open up our offshore and onshore oil reserves for exploration." It's unclear how drilling for oil relates to monetary policy.
Referencing calls from foreign leaders who oppose the Fed's plan, Palin will call on Bernanke to "cease and desist." The former mayor of Wasilla, Alaska, doesn't appear to mention the fact that foreign leaders are concerned because the Fed's plan is likely to lead to a devaluing of the dollar relative to other currencies, which should stimulate exports and cut into imports.