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Weekend Reading: Open Letter to Ben Bernanke: Hoisted from the Archives from Five Years Ago

The five-year anniversary of the right-wing anti-Bernanke QE letter coincides with the choice for President of the Minneapolis Fed of Neel Kashkari, with his apparent belief that expansionary monetary policy are destructive:

Fifth anniversary: Open Letter to Ben Bernanke:

The following is the text of an open letter to Federal Reserve Chairman Ben Bernanke signed by several economists, most of them close to Republicans:

We believe the Federal Reserve’s large-scale asset purchase plan (so-called ‘quantitative easing’) 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’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that ‘the Federal Reserve cannot solve all the economy’s problems on its own.’ In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We 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.

The Fed’s 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.

Cliff Asness AQR Capital

Michael J. Boskin Stanford University Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)

Richard X. Bove Rochdale Securities

Charles W. Calomiris Columbia University Graduate School of Business

Jim Chanos Kynikos Associates

John F. Cogan Stanford University Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)

Niall Ferguson Harvard University Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas Manhattan Institute & e21 Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant Grant’s Interest Rate Observer

Kevin A. Hassett American Enterprise Institute Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog The Hertog Foundation

Gregory Hess Claremont McKenna College

Douglas Holtz-Eakin Former Director, Congressional Budget Office

Seth Klarman Baupost Group

William Kristol Editor, The Weekly Standard

David Malpass GroPac Former Deputy Assistant Treasury Secretary (Reagan Administration)

Ronald I. McKinnon Stanford University

Dan Senor Council on Foreign Relations Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle

Amity Shlaes Council on Foreign Relations Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer Elliott Associates

John B. Taylor Stanford University Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)

Peter J. Wallison American Enterprise Institute Former Treasury and White House Counsel (Reagan Administration)

Geoffrey Wood Cass Business School at City University London


A spokeswoman for the Fed responded:

As the Chairman has said, the Federal Reserve has Congressionally-mandated objectives to help promote both increased employment and price stability. In light of persistently weak job creation and declining inflation, the Federal Open Market Committee’s recent actions reflect those mandates. The Federal Reserve will regularly review its program in light of incoming information and is prepared to make adjustments as necessary.  The FederalReserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment.

In particular, the Fed has made all necessary preparations andis confident that it has the tools to unwind these policies at theappropriate time.

The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.


Well Worth Reading

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