Paul Krugman: Axis of Depression

[cal04]

http://www.nytimes.com/2010/11/19/opinion/19krugman.html?partner=rssnyt&emc=rss

What do the government of China, the government of Germany and the Republican Party have in common? They’re all trying to bully the Federal Reserve into calling off its efforts to create jobs. And the motives of all three are highly suspect.

It’s not as if the Fed is doing anything radical. It’s true that the Fed normally conducts monetary policy by buying short-term U.S. government debt, whereas now, under the unhelpful name of “quantitative easing,” it’s buying longer-term debt. (Buying more short-term debt is pointless because the interest rate on that debt is near zero.) But Ben Bernanke, the Fed chairman, had it right when he protested that this is “just monetary policy.” The Fed is trying to reduce interest rates, as it always does when unemployment is high and inflation is low.

(snip)
So what’s really motivating the G.O.P. attack on the Fed? Mr. Bernanke and his colleagues were clearly caught by surprise, but the budget expert Stan Collender predicted it all. Back in August, he warned Mr. Bernanke that “with Republican policy makers seeing economic hardship as the path to election glory,” they would be “opposed to any actions taken by the Federal Reserve that would make the economy better.” In short, their real fear is not that Fed actions will be harmful, it is that they might succeed.

Hence the axis of depression. No doubt some of Mr. Bernanke’s critics are motivated by sincere intellectual conviction, but the core reason for the attack on the Fed is self-interest, pure and simple. China and Germany want America to stay uncompetitive; Republicans want the economy to stay weak as long as there’s a Democrat in the White House.

[Skink]

1. they're just mean.

I just hope our system of Checks and balances can withstand the onslaught.

[Hannah Bell]

2. kr

[DJ13]

3. China & the GOP have the same reason

The multi-national corporations want to continue allowing China to depress the Yuan to maximize profits, and anything that might depress the Dollar makes manufacturing in China less profitable.

[neverforget]

4. Republicans want the economy to fail for political reasons. They don't give

a shit about the Country, just their political livelihood.

[TwilightGardener]

5. Traitors.

[highplainsdem]

6. K&R

[applegrove]

7. A low US dollar will make it harder for rich americans to go shopping for stocks in

the BRIC (Brazil, Russia, India and China) countries. Also high unemployment means that unions will loose power. So what the GOP want is an economy completely attuned to rich people needs. No arena is allowed that might favour the needs of the middle class.

[Amonester]

8. The repukes ultimate goal is to succeed at starving the workers so

that one day, and that day cannot come too soon for these corporate sellouts, most out-of-work workers will come begging them for $2/day jobs like they do in China...

That's all these repukes want. That, and more quagmires than they already profit from.

[whoneedstickets]

9. Inflation.

Another reason is opposition to the possible inflation that Qe2 (and the fed's monetary policy) might have.

Inflation involves a redistribution of wealth from lenders to borrowers ( I lent you dollar with value X and you repay me dollars of lower value) and may be the only way to eliminate the debt overhang that we are suffering from. If we inflate the value of assets (like homes) fewer people will be under water. Inflation may spur wage increases and will really squeeze lenders with fixed rates.

Inflation can hurt retirees, folks living on their savings etc. As long as they raise the payments to fixed income recipients the worst of this can be ameliorated.