Floyd Norris inflicts a little accountability moment on Cliff Asness, Michael J. Boskin, John F. Cogan, Douglas Holtz-Eakin, John Taylor, Niall Ferguson, and company:
Predictions on Fed Strategy That Did Not Come to Pass: ON the day after Democrats lost control of the House of Representatives in the 2010 midterm election, the Federal Reserve announced it would purchase $600 billion in Treasury securities — a program that quickly became known as Q.E.2…. A group of 23 economists, including former aides to Republican presidents and presidential candidates, published an open letter to the Fed’s chairman, Ben Bernanke, saying the program should be “reconsidered and discontinued.” The planned bond purchases “risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment,” the economists wrote. The Fed did not back down, and Republican efforts to pass legislation removing the Fed’s mandate to seek full employment were not successful. The next year, the Fed moved on…. But as the accompanying charts indicate, the Fed’s critics of 2010 and 2011 have not proved to be prescient. Far from bringing disaster, Q.E.2 appears to have helped the economy…
To the best of my knowledge--and I have looked--not a single one of the signatories has done anything to mark his or her beliefs to market, or done anything to apologize for getting it wrong.
Open Letter to Ben Bernanke: November 15, 2010, 12:01 AM
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.