Alan Blinder wrote a column in Monday’s Wall Street Journal defending the Federal Reserve’s new quantitative easing (QE) policy. This policy has come under attack from many directions, including foreign ministers (worried about declines in the dollar) and Republicans (worried about inflation). In the latter camp was Sarah Palin, who criticized the policy, and then got her facts wrong about inflation, and then misquoted the Journal to defend herself.
Blinder is an economics professor at Princeton, and he takes a professor’s approach to the issue, explaining that the current bout of QE is pretty much the same as what the Fed normally does (printing money to buy short term Treasury bills), except that this time the Fed is buying long term securities. Blinder also notes that inflation is currently below the Fed’s target rate of 1.5-2%, so we have a ways to go before inflation becomes a problem, and the Fed can unwind this policy well before inflation gets out of hand.
Now some economists tend liberal, and some tend conservative, and Blinder is on the liberal site of the line, although not nearly as liberal as Paul Krugman. Yes, he also defends Keynes in the same column, and points out that the Republican phrase “job killing spending” is ridiculous. But Blinder is also a highly respected economist and co-author of one of the standard introductory texts, which I used in college. So if I had to choose who to believe on the likely effects of a Federal Reserve policy, I would choose Alan Blinder over Sarah Palin every time.