2010 Reminder: QE = Currency Debasement and Inflation

One of my biggest complaints about the media is the lack of accountability. People say things on TV in print an on radio, and then . . .  Poof!  No consequences. They influence public perception of issues, affect policy debates, drive legislation.

This is a perfect example of a stern warning of currency debasement and inflation due to QE. Let me point out this was made 3 years ago today — hence, it has been terribly wrong.

I won’t give you advice — but I keep track of who is consistently wrong, whose histrionic forecasts are both silly and wrong. Their future comments are valued accordingly.

e21 Team | 11/15/2010

To: Chairman Ben Bernanke
Federal Reserve
Washington, DC

Dear Mr. Chairman:

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.

Respectfully,

Cliff Asness
AQR Capital

Michael J. Boskin
Hoover Institution, Stanford University
Former Chairman, President’s Council of Economic Advisors

Richard X. Bove
Rochdale Securities

Charles W. Calomiris
Columbia University Graduate School of Business

Jim Chanos
Kynikos Associates

John F. Cogan
Hoover Institution, Stanford University
Former Associate Director, U.S. Office of Management and Budget

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
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
GrowPac, Encima Global
Former Deputy Assistant Treasury Secretary

Ronald I. McKinnon
Stanford University

Joshua Rosner
Graham Fisher & Co., Inc.

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 Management Corporation

John B. Taylor
Hoover Institution, Stanford University
Former Undersecretary of Treasury for International Affairs

Peter J. Wallison
American Enterprise Institute
Former Treasury and White House Counsel

Geoffrey Wood
Cass Business School at City University London

(Institutional Affiliations are for Information Only)

See the letter as printed in the Wall Street Journal (PDF)

Previously:
An Open Letter to Bernanke of Dubious Authorship (November 15th, 2010)