In the past, a passive public might have ignored goobledygook about ?quantitative easing.? No more.
The latest Bloomberg Businessweek documents the political battle over Keynesian efforts to boost the economy by creating money out of thin air:
With the impact of Obama’s $814 billion stimulus program fading and Republicans unwilling to spend more, the President was depending on the Fed to prod the recovery. And Fed officials say they felt obliged to act?to try to reduce unemployment they think is dangerously high and increase inflation they fear is dangerously low. With short-term interest rates already near zero, they sought to bring down long-term rates by taking the unorthodox approach of buying Treasury bonds. The move had already elicited protests from German and Brazilian officials, who worried it would drive down the value of the dollar, making their exports costlier in the U.S. Bernanke and Geithner expected further complaints at the Group of 20 summit in South Korea the following week. They didn’t anticipate the size of the battle that erupted at home.
The political attacks on the Fed?once the most sacrosanct of government institutions?started slowly, with Tea Party-backed candidates such as Republican Rand Paul, running for the U.S. Senate in Kentucky, campaigning against the central bank. When Bernanke announced round two of quantitative easing (or QE2, as it became known) on the day after the election, the response was swift. Indiana Representative Mike Pence, a conservative bellwether and possible 2012 Presidential candidate, released a statement accusing the Fed of “masking our fundamental problems by artificially creating inflation.” A few days later, former Alaska Governor Sarah Palin, the unofficial leader of the GOP’s Tea Party wing, posted on her Twitter account that the Fed was planning to “print $ out of thin air.”
