Perry right on the money in Fed slam

Larry Kudlow:

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No, Ben Bernanke is not a traitor. This is a policy dispute; it’s not a matter of patriotism. However, and this is an important however, the rest of Perry’s statement suggests that his analysis of Fed policy is right on target. In other words, wrong words, right analysis.

The Texas governor, who by some polls is the new Republican presidential frontrunner, went on to say, “We’ve already tried this. All it’s going to be doing is devaluing the dollar in your pocket. And we cannot afford that.”

Well, to me that is exactly right.

Let’s take a quick look at Bernanke’s QE2 record of pump-priming: The dollar fell 12 percent on foreign-exchange markets. The consumer price index jumped over 5 percent at an annual rate. And the $600 billion cheapening of the greenback led to skyrocketing commodity prices, including oil, gasoline, and food. That oil-price shock is one of the principal factors behind the 0.8 percent first-half economic stutter. As a result of the jump in inflation linked to QE2, real consumer incomes slumped badly and consumer spending fell substantially.

Before QE2 the economy was growing about 2.5 percent, even though it was already blunted by numerous tax and regulatory obstacles. But the cheap-dollar oil shock came perilously close to pushing us into recession.

So it turns out that Governor Perry -- even with his overly strong language -- is a pretty sharp economic and monetary analyst.

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Perry is right on the money to coin a phrase. While Texas oil business benefited from the devaluation of the currency, it was not good for the country and the oil business is better served by opening up the areas for development that the democrats have roped off during the last 40 years.