Debunking QE2 Criticisms (Wall St Cheat Sheet)
The merits of QE2 have been tirelessly debated, but when examining the harsh criticisms of the Fed’s latest action you must sift through the misrepresentations that have been slung around. The first is the idea that the Fed introduced QE2 strictly in order to fulfill its mandate for full employment. The truth is, eliminating the Fed’s employment mandate, which has been proposed, would not have altered the Fed’s actions. Second, QE2 has already caused inflation. This morning’s lower-than-expected CPI data dispels this notion, and the rise in food prices is largely due to other factors, including the Russian wildfires that destroyed much of the country’s wheat crop. Finally comes the idea that the Fed is simply pursuing the wealth effect, i.e. propping up the stock market in hopes that people will feel richer and thus spend more. While it could be a side effect, it is not the treatment. The Fed, critics state, is blowing a bubble in the equity markets. In reality, equity prices are still cheap by historical metrics.
Warren Buffet: Amid the Fog of Panic, Our Leaders Prevented Calamity (New York Times)
(Note: Brandon beat me to the punch!) Warren Buffet yesterday penned this eloquent thank you letter to our nation’s leaders for their action during the financial crisis. Sadly, it has been become chic to lambast actions undertaken by the Fed, Treasury and White House. If our leaders had shown a reluctance, or even the slightest hesitation, in rescuing institutions and preventing the dominoes from falling, our country would find itself in a much more perilous state than it does today. As panicked reigned, you, Uncle Sam, provided a steady hand. While we acknowledge that you are nowhere near perfect and implore you to regulate more sincerely into the future, it would be disingenuous not to thank you for your decisive actions.
Who Needs Facts? On President Obama’s ‘$200 million-a-day’ Trip to Asia (New York Times)
In the build-up to the G-20 Summit in South Korea, the conservative media brigade latched on to a quote from an anonymous, alleged provincial official in India stating President Obama’s envoy to Asia would incur costs of $200 million a day, or a total of about $2 billion. Obama was bringing along 3,000 people, one-tenth of the American Navy, renting 870 hotel rooms at the Taj Mahal Palace Hotel, and spending more each day than it took to finance the war in Afghanistan. After Tea Partier Michele Bachmann first made the assertion to Anderson Cooper on CNN, but Rush Limbaugh, Glenn Beck and other conservative pundits found the figures irresistible. Who cares if the numbers were created out of thin air? Later fact checking revealed the trip’s costs were in line with similar trips by Presidents Clinton and Bush in the neighborhood of $5 million a day.
