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With All Due Respect, Us Policy Is Clueless.

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First it was the might of the emerging economic superpowers, Brazil and China. Then Germany weighed in. Now Sarah Palin, the controversial failed Republican vice-presidential candidate, has entered the debate over the Federal Reserve's $600bn package (£370bn) to revive the moribund US economy.

With world leaders heading to Asia to discuss the imbalances of the global economy at the G20 summit in Korea this week, Palin was set to use a speech in Phoenix, Arizona, to declare that she was "deeply concerned" and would call on the US Federal Reserve chairman, Ben Bernanke, to "cease and desist" buying up government debt.

"If it doesn't work, what do we do then? Print even more money? What's the end-game here? Where will all this money printing on an unprecedented scale take us? ... All this pump-priming will come at a serious price," Palin will say, according to snippets of the speech obtained by National Review.

"Everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump-priming would push them even higher," Palin adds, putting a populist slant on monetary policy. Her remarks place her firmly, if awkwardly, in company with an international chorus of critics opposed to a US policy that many fear is not only designed to ward off deflation but to drive down the value of the dollar and of US debt.

Yesterday, Beijing warned that the US policy could swamp emerging economies with destabilising inflows of speculative capital. China's deputy-finance minister, Zhu Guangyao, said the US "is not recognising the responsibility it should take as a reserve currency issuer, and not taking into account the effect of this excessive liquidity on emerging-market economies".

The harshest criticism so far came from Germany's finance minister, Wolfgang Schäuble, who said: "With all due respect, US policy is clueless."

He said: "It's not that the Americans haven't pumped enough liquidity into the market. Now to say 'let's pump more into the market' is not going to solve their problems." Officials in Brazil and South Africa have also added dissenting voices to the debate over US policy.

But as US administration and treasury officials fanned out to build support for QE2, as the second round of quantitative easing is known, Barack Obama used his visit to India to hit back at critics, arguing that the stimulus package would drive up US growth rates, which would be "good for the world as a whole".

The next US Presidential election could be interesting, if more printing hasn't solved the problem Obama is going to get one hell of a kicking during the campaign.

The free money is to try and save the banking system and fiat. However history says this will fail, although it's just possible they may print the right sort of money this time to make it work, perhaps all previous attempts failed because they got the formula wrong?

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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