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AB Leadership Tuesday, Aug 9 2011

Think Progress: Tim Pawlenty’s Extremely Weak Grasp Of Monetary Policy And International Finance

Aug 09, 2011

On August 9, 2011, Think Progress’s Matthew Yglesias reported:

“When American Bridge sent a tracker to record this talk from Tim Pawlenty, I’m sure they were hoping he’d commit gaffes with a bit more political potency than the ones on display here. But if you happen to care at all about policy substance, what you’re about to see is the former Minnesota governor make a number of blundering errors that reveal fundamental misunderstandings of how monetary policy and the international financial system works:

Pawlenty refers here disparagingly to “something called QE1 and QE2, the Treasury was buying our own debt. So they were paying off their Visa card with their Discover card.” This is simply not what either quantitative easing measure was. Rather, the Federal Reserve bought the debt. A good analogy would be to say that this is like paying off your Visa card by using magical powers to conjure up the amount of money you need. This is, of course, exactly what any household would do if they had magic powers. You probably don’t run your household finances or your small business like that because you probably don’t have magic powers. But the Federal Reserve does have the power to create money. The possible problem with money creation is that if you do too much of it, you get too much inflation, but we don’t have too much inflation…”

Published: Aug 9, 2011

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