The Unthinkable Removal of Quantitative Easing
“The purpose of Newspeak,” George Orwell, wrote in his novel 1984, “was not only to provide a medium of expression for the worldview and mental habits proper to the devotees of Ingsoc [Orwell’s name for the ruling regime in 1984], but to make all other modes of thought impossible.”
The columnist William Pfaff, with whom we often agree, used Orwell’s quote yesterday to describe how the United States government has come to inextricably support the bases at Guantanamo, which he likens to Gulags of Stalinist Russia – only worse because Gulag sentences, at least, had an end date.
While closing the base seems to have become politically impossible, “something still might usefully be said about this situation,” Pfaff writes with perceptively dying hope. It’s “obviously a phenomenon of totalitarian character, emulating, no doubt wittingly, the destruction of judicial constraint in the Nazi system by means of arbitrary imprisonment in concentration camps and by methods generalized in Gestapo and SS practice, and in Stalinist Russia by its secret police and forced labor camps.”
If you haven’t read the piece, we recommend you do so here: Locked In.
As frightening as Pfaff’s perception of Guantanamo is, we couldn’t help but think of Orwell this morning when listening to NPR’s coverage of Office for National Statistics’ release of British gross domestic product (GDP) this morning.
Fact is, GDP in Great Britain turned positive again in the first quarter of 2011 – just barely. The statisticians in London reckon the UK economy grew 0.5%, making up for the 0.5% loss in Q4 2010.
The news was interpreted as a disaster by an analyst from the City talking to Morning Edition. The “austerity measures” put in place by the Cameron government will continue to “suppress” GDP, unless the central bank opens the monetary spigots to counter the closing of the fiscal ones.
Since quantitative easing (QE) in Britain has amounted to a quaint $121 billion since the panic of 2008 – out of nearly $5 trillion pursued by the US, European Union and Japan – the commentator presumes the English are doomed.
When asked to speculate on the effect of “austerity measures” proposed by the US president for the US economy, the commentator couldn’t fathom it. What might actually happen if the Fed pulled back on QE and Congress actually proposed to get spending in line?
Shiver me timbers. All economic activity is derived from government spending or monetary easing. To think of the economy in any other terms has become politically “irresponsible”… even “kookie”… these days. One can’t even imagine it.
The analogy between foreign policy and monetary policy would be a hoot, if the societal trend weren’t so ominous.
“Guantanamo has been a factor in what it is not unreasonable to call the totalitarianization of American political culture,” Pfaff asserts in his piece, “taking place through the effective prohibition (or demonization) of certain political stances, or of the advocacy of certain political positions, deemed ‘unpatriotic’ and therefore unacceptable in the political discourse of the nation – including, in some cases, in congressional discourse and debate.”
As much as it is heretical to disagree with foreign policy made behind closed doors by unelected officials, so is it equally impolite to question the wisdom of monetary policy made behind closed doors by another group of men in Washington.
We presume the press conferences now scheduled by the Federal Reserve, the first of which we’ll be witnessing this afternoon, are designed to open the closed doors.
But still we have our suspicions.
“What are the odds?” for example, we couldn’t help but thinking as we put pen to paper this morning “that on the eve of Ben Bernanke’s first regularly scheduled press conference the stock market has reached multiyear highs?”
The Dow and the S&P are now at levels last seen in June 2008. The Nasdaq, on a tear, hasn’t seen territory like this since January 2001.
Bernanke couldn’t ask for anything better. Why, we can just imagine the setting for this press conference.
“Yeah, baby, the wealth effect!”: Shock and awe econostyle.
“Stock prices rose and long-term interest rates fell,” Bernanke wrote in his Op-Ed in the day after the Federal Reserve formally launched “QE2” last November, “when investors began to anticipate” a new round of easy money. Mission accomplished.