The headline for Michael Barone‘s latest Washington Examiner article tells us that the Fed’s $600 billion bond buy “lays egg here and abroad.” Barone says he’s “astonished by the degree of disrespect” prompted by the latest economic policies from President Obama and Fed Chairman Ben Bernanke:
Not surprisingly, Chinese and German leaders are squawking loudly, complaining that the United States is attempting to use their strength to compensate for our own weakness. Brazil’s finance minister, Guido Mantega, minced no words when he called the Fed’s action the beginning of “currency wars.”
Obama’s efforts to get agreement at the G-20 conference were not successful. Seldom if ever has an American leader been pummeled with such criticism at an international economic conference.
During the 2008 campaign, we were told that foreigners would once again respect America if voters elected Obama. That wasn’t apparent in Korea.
In Washington, too, there have been complaints coming from a surprising source. Shortly after Bernanke announced the Fed’s QE2 policy, Federal Reserve Board member Kevin Warsh wrote an article for The Wall Street Journal saying that there won’t be much easing and that the Fed can’t compensate for bad fiscal policy. “The Federal Reserve is not a workshop for broken fiscal, trade or regulatory policies,” he wrote.
Warsh has been regarded, by me and others more expert, as a solid Bernanke ally on the Fed, one given to justifying the chairman’s policies to the outside world, and he voted with Bernanke on QE2. But in the Journal, he wrote, “I consider the (Fed’s) action as necessarily limited, circumscribed and subject to regular review.” Translation: Ben, you haven’t got my vote for long.
