Fed Pumping Scorned by China, Russia

by Ryan on November 8, 2010

in Economy,Europe,International Relations,Russia,Stupid government

Remember last week when the Federal Reserve agreed to pump $600-900 billion in another “quantitative easing” (QE2) strategy to stimulate the economy?  Well, China and Russia are not happy about it, and Obama doesn’t seem to care!  Obama might look good with a lyre.  Yes/no?

Why is this important?  Russia and China are two nations who essentially abandoned academic economic ideology due to practical realities:  the collapse of the Soviet Union forced Russia to paste together some kind of economic order, and Deng’s market reforms brought China out of the Middle Ages into being a world player with a future to think of.

Meaning:  they don’t mess around the same way we do and don’t have the luxury to endlessly experiment with antiquated Keynesian pump-priming schemes!

If you look at America’s economy since the mid-1980s you find a pattern:  bubbles bubbles everywhere — S&L, tech stocks, oil, housing, student loans (on the horizon)!  Now, potentially a currency bubble?

The fear is that if the QE2 doesn’t work perfectly, our actions could set off a terrible chain reaction affecting currencies, inflating commodoties, inciting market shocks, creating protectionism, and sparking the very deflation we’re doing all this to avoid!  All of it is plausible.

That’s why I agree with those who don’t see the potential risks worth the chance we’ve decided to take.

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