Apologies for the long absence – I have a big story coming out tomorrow (definitely come back to rollingstone.com tomorrow around this time) and spent most of last week bogged down in the fact-checking process. I’ll have more on that piece when it comes out.
Lots of stuff going on this week, including many dire predictions about the economy, but the most interesting thing I saw in the last days was the sudden appearance of Quantitative Easing as a campaign issue. For those who don’t remember QE, this is a magical money-printing program the Fed has been using two years in a row to artificially prop up the economy (well, parts of it, anyway). “Helicopter Ben” Bernanke has printed a couple of trillion dollars, just waved a wand and invented them, then used those funds to buy things like mortgages and t-bills.
That this is a terrible idea ought to be self-evident. The irritating thing is that this ought naturally to be a campaign issue for progressives, because the most direct consequence of QE is to magnify the income inequality problem, as this study of the British version of QE (decried by our witty friends at Zero Hedge as the winner of the “real men of captain obvious genius award”) concluded. The study by Dhaval Joseph of BCA research concluded that QE might have been a factor leading to the British riots.
The reason QE is “good for the rich and bad for the poor” is obvious: by pouring trillions in jet-fuel cash into the inequity engine that is the banking sector, we’ve seen massive increases in share prices and corporate profits, without any resulting increases in wages. As the Joseph study concludes:
Real wages – adjusted for inflation – have fallen in both the US and UK, where QE has been a key tool for boosting growth. In Germany, meanwhile, where there has been no quantitative easing, real wages have risen.
It should be obvious to anyone that printing two trillion new dollars and handing it to the corrupt financial sector to play with will not result in higher wages for ordinary people. This ought to be an issue for the left/progressives, but thanks to Barack Obama’s ownership of the program, it’s now turning into a campaign issue for Republicans. Most notably, Texa-creep Rick Perry came out recently with a uniquely thuggish criticism of QE, essentially threatening Bernanke with a Texan mob if he does what everyone expects him to do and enacts a third QE program:
"If this guy prints more money between now and the election, I don't know what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas," said Perry.
To me this whole issue encapsulates the basic failure of the Obama administration. It has surrendered to Wall Street interests, and in doing so has allowed lunatics like Rick Perry to step into legitimate roles as critics of corrupt policy.
Of course Perry’s gripe with QE isn’t that it boosts corporate/banking profits at the expense of the general population, but that it’s unsound economics and fiscally irresponsible – which is true as well, but that’s not the point. The point is that we’re heading into 2012 and Barack Obama is going to be owning a hell of a lot of corrupt policy. Voters who want to break up the Wall Street/government oligopoly are increasingly left with only fringe politicians as champions, and (here's my Captain Obvious observation) that blows.