Fed Officials Raises Doubts Over New $600B Program

Key quote:"The Federal Reserve is not a repair shop for broken fiscal, trade or regulatory policies," Warsh said. "Given what ails us, additional monetary policy measures are, at best, poor substitutes for more powerful pro-growth policies."

I would agree that pro growth policies need to be enacted.  This is a band aid over a deep wound.

Not everyone is in agreement with Warsh's doubts about this new QE2.

Taking a different stance, James Bullard, president of the Federal Reserve Bank of St. Louis, argued in a speech Monday in New York that the "benefits outweigh the risks." He also voted for the $600 billion program last week.

Bullard is afraid of deflation.  I suppose inflation will have to bite him on the rear end before he changes his stance.

The Fed may be losing its ability to use monetary policy to stimulate the economy.  The Fed is caught between a rock ( double dip recession) and a hard place ( igniting inflation).

The Fed last week said it will monitor the effect of the bond-buying program on the economy. It left the door open to scaling back the purchases if the economy grows more than expected or if high inflation becomes too much of a threat. On the other hand, the Fed indicated it would boost its purchases if economic conditions weakened.

Evidently, there is disagreement over growth or inflation as being a cause of a possible change in course.




Update:

Palin Lashes Out At Bernanke, Urging Him To 'Cease And Desist' Purchase Of Treasuries

Something I want to comment upon is this quote: "Palin then will argue that "the worse part" of this is that the White House "refuses to open up our offshore and onshore oil reserves for exploration." It's unclear how drilling for oil relates to monetary policy."

But it does relate to a pro growth policy.  You don't get out of this problem by the printing press.   That's all they've got now after the spending spree this last 2 years.