Sarah Palin spoke before a trade association in Phoenix today about the US central bank's plan to buy $600 billion in Treasuries in the hopes of lowering interest rates and -- just maybe! -- raising inflation expectations. Pause for a moment. Sarah Palin on the Federal Reserve is one of those immortal phrases, like Lindsay Lohan stars in Anna Karenina, or La Boheme featuring Justin Bieber, a magical, irresistible blend of high and low that might just make mainstream Americans care about monetary policy. So what did she say -- and more importantly, what should we think about it?
In a nutshell, the Fed wants three things to happen. It wants banks to lend more with easy money, families to borrow more with low interest rates, and consumers to buy more today with the expectation that prices will rise tomorrow. Palin said the Fed's plan would raise inflation, weaken the dollar, and hurt the country. She's right about the first two and wrong (probably) about the third.
Let's look at inflation. Wall Street Journal reporter Sudeep Reddy smartly pushed back on Palin's statement that "[grocery] prices have risen significantly over the past year or so." Reddy noted that food and beverage price inflation was actually growing at the slowest pace on record. Palin countered on Facebook, upbraiding Reddy for not reading the WSJ on grocery stores faced with higher food costs. Who's right?