Federal Reserve's Quantitative Easing Gets Slammed By Conservatives, Investors
Adding their voices to the chorus of criticism of the Federal Reserve, a group of academics, analysts, GOP strategists, hedge fund managers and publishers have signed a letter to Fed chairman Ben Bernanke, urging him to reconsider the Fed's quantitative easing policy (hat tip to Morning Money).
The asset-purchase plan, in which the central bank will acquire up to $600 billion of new U.S. government debt, will not achieve the Fed's mandate of maximum employment, the letter says. What's more, the letter continues, quantitative easing could make the problem worse.
"[We] 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 letter reads.
In a Washington Post op-ed earlier this month, Bernanke suggested that inflation was too low to stimulate healthy economic growth, and that quantitative easing could help augment it. "[L]ow and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains," he writes.
But the signatories see things differently "We disagree with the view that inflation needs to be pushed higher," the letter says.
The signatories, 23 in total, who belong to a group called e21: Economic Policies for the 21st Century, include hedge fund managers Jim Chanos, Cliff Asness and Paul Singer; economists Douglas Holtz-Eakin, Gregory Hess, Niall Ferguson and Charles Calomiris; conservative think-tankers Michael Boskin and John Cogan; and publishers James Grant and William Kristol.
The Federal Reserve is supposed to operate independently of any other political group, and so criticism of its activities is unusual. In recent weeks, though, the quantitative easing policy has taken fire from a diverse array of public figures, including Pimco managing director Bill Gross, Germany's finance minister Wolfgang Schaeuble and Fox News analyst Sarah Palin.