Howard Richman & Raymond Richman, two of the three generations of the Richman family of economists, give due credit to Sarah Palin who accurately predicted that Quantitative Easing would drive up inflation, but it would not have its intended effect of incresing American exports and business investment:
On June 15, the Bureau of Labor Statistics released the inflation data for May. If you didn't hear about the new data, you are not alone -- the mainstream media buried the story. Why? Inflation hit 3.6% in May, even though gasoline prices actually fell that month. Inflation has been rising since November...Obviously, Gov. Palin has being doing her homework, not only on foreign policy, but economic policy as well. The corrupt media and her other political enemies would prefer that you did not know this.
Back in November, Governor Palin took on QE2 and President Obama's defense of it. Her predictions have turned out to be correct. When making her case against QE2, she argued that it could cause inflation, but would not much help U.S. net exports and business investment, the two factors needed to grow the U.S. economy.
Indeed, worsening net exports (exports minus imports) have been keeping the United States stuck in its current economic stagnation.
Bernanke hoped that QE2 would weaken the dollar which would turn U.S. net exports around. But Palin predicted that any positive effects would be temporary. In November she wrote:Will driving the dollar down in this way do anything to boost U.S. exports? The short answer is not really. A weaker dollar will temporarily boost exports by making our goods cheaper to sell; but inevitably other countries will respond in kind, triggering the kind of currency wars economists are warning us about.Indeed, so far Palin has been correct. QE2's effect upon net exports appears to have been temporary.
Bernanke had hoped that QE2 would stimulate business investment. But, in November, Palin predicted that QE2 would have little effect upon business investment. She wrote:Will QE2 then at least boost domestic investment? No, again. As I explained in my speech in Phoenix, the reason banks aren't lending and businesses aren't investing isn't because of insufficient access to credit. There's plenty of money around, it's just that no one's willing to spend it. Big businesses especially have been hoarding cash. They're not expanding or adding to their workforce because there's just too much uncertainty created by a lot of big government experiments that aren't working. It's the President's own policies that are creating this uncertainty.Indeed... the rate of growth in real fixed investment slowed in the fourth quarter of 2010 and the first quarter of 2011, despite QE2.
Palin argued that QE2 was a dangerous experiment that risked inflation. She urged Obama to instead balance budgets, cut taxes and reduce burdensome business regulation. In November, she concluded:If the President was serious about getting the economy moving again, he'd stop supporting the Fed's dangerous experiments with our currency and focus instead on what actually works: reducing government spending and boosting business investment through good old fashioned supply side reforms (cutting taxes and reducing overly burdensome regulations). Simply running the printing presses in order to avoid paying off your debts is no way for a great nation to behave.[...]
The mainstream media pretend that Palin is stupid. But she is actually blessed with a very rare commodity these days - economic common sense. She is the only potential presidential candidate currently advocating the three basic principles that would restore economic stability and long-term growth to the American economy: (1) balanced monetary growth, (2) balanced budgets, and (3) balanced trade.
h.t: Henry D'Andrea