How do you get 23 economists to agree? Criticize Bernanke.
Today, an open letter to Fed Chair Ben Bernanke appeared via the Wall Street Journal questioning the wisdom of the Fed鈥檚 round two of quantitative easing. It鈥檚 signed by 23 economists, financial writers, fund managers and others, including, to name just a few鈥�
* Richard X. Bove of Rochdale Securities
* Jim Chanos of Kynikos Associates
* Niall Ferguson of Harvard University
* James Grant of Grant鈥檚 Interest Rate Observer
* Seth Klarman of Baupost Group
* David Malpass of GroPac
* John B. Taylor of Stanford University
It鈥檚 a group that would not necessarily agree on wide range of issues, but that鈥檚 on the same page when it comes to QE2 and the destruction it could potentially unleash on the US economy and wider financial markets.
Here鈥檚 a part of the text, as published in WSJ:
鈥淲e believe the Federal Reserve鈥檚 large-scale asset purchase plan (so-called 鈥榪uantitative easing鈥�) 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鈥檚 objective of promoting employment鈥�
鈥溾�e 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.
鈥淭he Fed鈥檚 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.鈥�
The signatories are members of a group named, , so are in some way previously organized. However, they still seem to represent at least part of a rising and mainstream current of criticism directed toward the Fed鈥檚 ambitious, unpredictable, and most likely ill-fated plan. In the political sense, the outcry came most quickly and loudly from leaders abroad, but the dissent now also appears to be growing increasingly fervent at home. If nothing else, the letter represents more collaborative outrage than we saw with the first round of QE, so, at least in that sense, it鈥檚 a start鈥�
You can read the full text of the open letter, the complete list of signatories, and a Fed spokeswoman鈥檚 rather boilerplate-sounding response, in the Wall Street Journal鈥檚 post on .
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