Blogs > HNN > TAX CUTS MEAN BERNANKE SHOULD STOP QE2

Dec 13, 2010 3:11 pm


TAX CUTS MEAN BERNANKE SHOULD STOP QE2



As the economy was so weak, unemployment so high and Congress was in no mood for a second stimulus, I have no choice but to print money, Bernanke has been saying. Fine. But now Congress is about to enact a second stimulus in the form of a series of tax cuts worth 800 billion dollars, so Bernanke has no valid reason to continue his money printing.

The announcement has already succeeded in dropping US bonds and boosting stock prices. Stopping it would calm plenty a frayed nerve and decrease inflation fears. Let us not forget, QE2 failed to either lower mortgage rates (they have actually increased since it began) or decrease the value of dollar which depends more on events abroad than Fed actions.

So, crediting the tax cuts for the policy reversal, can provide the Fed with an elegant way to end a failed experiment.

Update: Alas, the failure of QE2 apparently does not seem to make Bernanke relent.



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