Top Republicans caution the Fed on printing money

November 18, 2010 06:02

Senate Majority Leader elect McConnell, Senator Jon Kyle, Speaker elect Boehner, and Rep. Cantor all signed a letter sent to Fed Chairman Ben Bernanke expressing their concern about the Fed plan to print more money to buy US Treasuries.

We’ve been trying to alert people to the disastrous consequences of this strategy called QE2, QEII or quantitative easing which are just better sounding names for monetizing the debt or printing money which Bernanke said under oath that he would not do.

At least some in the congress are waking up to the looming disaster. Like retiring Senator Judd Gregg I am not confident that our political will can avert a fiscal meltdown. Senator Gregg recently said “Right now we’re in a situation where it’s totally predictable what’s gonna happen. I can’t pick the date, but I guarantee you that three to seven years from now we will see a financial crisis of inordinate proportions if we don’t take actions to reduce the rate of growth of our debt,” Gregg said. “Unfortunately American politics and governance usually reacts best in crisis and isn’t very good in anticipation of problems. We’re good at the next election but we’re not very good at the next generation.”

He continued: “The result of a financial meltdown as a result of people losing confidence in our fiscal structure will be a significant reduction in the standard of living for most Americans and a very dramatic change in our relationship internationally in the area of national security.”

Here is the letter sent by Republican leaders but I feel it is too little too late.

Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551

Dear Chairman Bernanke:

We firmly believe that monetary policy decisions by the U.S. Federal Reserve must be free and independent from political pressures. At the same time, the Federal Reserve should be open to receiving input and data from a wide range of sources. This combination preserves confidence in the credibility and effectiveness of decisions made by the Federal Reserve.

It is with that understanding that we write to express our deep concerns over the recent announcement that the Federal Reserve will purchase additional U.S. Treasury bonds, the so-called Quantitative Easing 2. While intended to improve the short-term growth of the U.S. economy and help maintain a stable price level, such a measure introduces significant uncertainty regarding the future strength of the dollar and could result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles that could cause further economic disruptions.

The Federal Reserve’s recent move has also generated increased criticism and action from other central banks and governments. We appreciate that such comments must be examined within the context of which they have been offered. However, any action taken by our nation or foreign nations that impairs U.S. trade relations at a time when we should be fighting global trade protection measures will only further harm the global economy and could delay recovery in the United States.

Perhaps most damaging, we believe that QE2 is giving the impression that the Federal Reserve will keep making new and different attempts to boost the short-term prospects for the economy. Our long-term growth depends on restoring confidence and certainty in our fiscal, regulatory, and trade policies — and not on government’s willingness to engage in additional stimulative measures. When asset prices increase due to anticipated Federal Reserve policy rather than economic fundamentals, it increases the potential for speculative action and erodes confidence in the economic outlook, making it more difficult to generate sustainable growth.

We hope you and the other Board Members will keep these concerns in mind as you review and discuss these issues in the coming months.


Mitch McConnell
U.S. Senator

John Boehner
Member of Congress

Jon Kyl
U.S. Senator

Eric Cantor
Member of Congress

Read these following eye opening articles to understand the extent of the fiscal calamity that this can cause.

~ Michael Whipple, Editor

Help Make A Difference By Sharing These Articles On Facebook, Twitter And Elsewhere:

Interested In Further Reading? Click Here