Advancing a Free Society

Open Letter to Ben Bernanke

Monday, November 15, 2010

(Four Hoover fellows signed this letter:  Michael Boskin, John Cogan, Niall Ferguson, and John Taylor)

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

Cliff Asness

AQR Capital

Michael J. Boskin

Stanford University

Former Chairman, President’s Council of Economic Advisors (George H.W. Bush Administration)

Richard X. Bove

Rochdale Securities

Charles W. Calomiris

Columbia University Graduate School of Business

Jim Chanos

Kynikos Associates

John F. Cogan

Stanford University

Former Associate Director, U.S. Office of Management and Budget (Reagan Administration)

Niall Ferguson

Harvard University

Author, The Ascent of Money: A Financial History of the World

Nicole Gelinas

Manhattan Institute & e21

Author, After the Fall: Saving Capitalism from Wall Street—and Washington

James Grant

Grant’s Interest Rate Observer

Kevin A. Hassett

American Enterprise Institute

Former Senior Economist, Board of Governors of the Federal Reserve

Roger Hertog

The Hertog Foundation

Gregory Hess

Claremont McKenna College

Douglas Holtz-Eakin

Former Director, Congressional Budget Office

Seth Klarman

Baupost Group

William Kristol

Editor, The Weekly Standard

David Malpass

GroPac

Former Deputy Assistant Treasury Secretary (Reagan Administration)

Ronald I. McKinnon

Stanford University

Dan Senor

Council on Foreign Relations

Co-Author, Start-Up Nation: The Story of Israel’s Economic Miracle

Amity Shlaes

Council on Foreign Relations

Author, The Forgotten Man: A New History of the Great Depression

Paul E. Singer

Elliott Associates

John B. Taylor

Stanford University

Former Undersecretary of Treasury for International Affairs (George W. Bush Administration)

Peter J. Wallison

American Enterprise Institute

Former Treasury and White House Counsel (Reagan Administration)

Geoffrey Wood

Cass Business School at City University London

(Photo credit: The White House)