American Thinker: Inflation climbs to 3.6% in May. Palin was right!

Well, the Bureau of Labor Statistics numbers are out, and just as Governor Palin warned us it would be, inflation is up. The American Thinker writes:

Back in November, Governor Palin took on QE2 and President Obama’s defense of it. Her predictions have turned out to be correct. When making her case against QE2, she argued that it could cause inflation, but would not much help U.S. net exports and business investment, the two factors needed to grow the U.S. economy.

Indeed, worsening net exports (exports minus imports) have been keeping the United States stuck in its current economic stagnation.  When imports go up relative to exports, Americans get more debt and lose jobs, whereas when exports go up, relative to imports, Americans get more income and gain jobs.  The decline in net exports may be slowing or preventing the U.S. economic recovery.

Bernanke hoped that QE2 would weaken the dollar which would turn U.S. net exports around.  But Palin predicted that any positive effects would be temporary. In November she wrote:

Will driving the dollar down in this way do anything to boost U.S. exports? The short answer is not really. A weaker dollar will temporarily boost exports by making our goods cheaper to sell; but inevitably other countries will respond in kind, triggering the kind of currency wars economists are warning us about.

Indeed, so far Palin has been correct. QE2’s effect upon net exports appears to have been temporary.  Although U.S. net exports worsened more slowly in November and December, they resumed their economy-sapping slide in February, as shown in the graph below.

[…]

Palin argued that QE2 was a dangerous experiment that risked inflation. She urged Obama to instead balance budgets, cut taxes and reduce burdensome business regulation. In November, she concluded:

If the President was serious about getting the economy moving again, he’d stop supporting the Fed’s dangerous experiments with our currency and focus instead on what actually works: reducing government spending and boosting business investment through good old fashioned supply side reforms (cutting taxes and reducing overly burdensome regulations). Simply running the printing presses in order to avoid paying off your debts is no way for a great nation to behave.

In May, she added balanced trade to her recipe for economic recovery. After meeting with Donald Trump, she said:

“What do we have in common? Our love for this country, a desire to see our economy put back on the right track,” Palin told reporters. “To have a balanced trade arrangement with other countries across this world so Americans can have our jobs, our industries, our manufacturing again. And exploiting responsibly our natural resources. We can do that again if we make good decisions.”

[…]

The mainstream media pretend that Palin is stupid. But she is actually blessed with a very rare commodity these days – economic common sense. She is the only potential presidential candidate currently advocating the three basic principles that would restore economic stability and long-term growth to the American economy: (1) balanced monetary growth, (2) balanced budgets, and (3) balanced trade.

You can read the entire piece here, and I strongly recommend that you do.



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