Tipsheet

Quantitative Easing Doesn't Make Anyone Easy

The Fed approved a second, $600 billion round of quantitative easing for our economy — a massive amount that is designed to ensure “price level stability,” and regulate inflation. This is simply invented money that will be printed and dropped, carpet-bomb style, into our economy.

The reasons for doing it are complex, but if I can try to distill them: there are not that many dollars for not that many goods and services right now, so decreasing the dollar value allows those goods and services to be worth more. Unemployment will decrease and we’ll all have more “stuff.” Theoretically, everyone will be better off, especially pension funds that are suffering — though, arguably that was the pension fund's own darn fault.

Federal Reserve chairman Ben Bernanke is on the defensive about this move. A number of critics have emerged from within our government’s financial institutions as well as from the world economy that are wary of artificially boosting our money supply. Sarah Palin has jumped into the fray – criticizing Bernanke after criticism from countries like China, who’s credit service agencies have recently downgraded our debt.

Intelligent people can disagree on the issue of quantitative easing, but it’s clear that most fiscal hawks are against it. Notably, Paul Ryan is against the plan, saying that it was “going to give us a big inflation problem down the road.”

Updated to add: it's also important to note that there are prominent conservatives do support this round of QE. For more backgrounder, there was a debate last week about whether Milton Friedman would support it. David Beckworth says yes. Allan Meltzer says no (subscription required).