Mitt Romney is Right – More QE Won’t Help

You never seem to know with Romney – one day he seems to have a sound understanding of the economy and then the next he seems to alter his position to satisfy his base. Today, he seems to be getting it (that, or he knows that QE3 could spark an equity market rally which would likely dampen his chances of winning) – via Bloomberg:

“Former Massachusetts Governor Mitt Romney said the Federal Reserve should refrain from a third round of large-scale asset purchases.

Romney, the presumptive Republican nominee for president, said that while the first round of bond buying by the U.S. central bank may have had a positive effect, a new round of quantitative easing will not help the economy.

“I am sure the Fed is watching and will try to encourage the economy,” Romney said in an interview broadcast on CNN’s “State of the Union” program. “But I don’t think a massive new QE3 will help the economy.”

Whether he’s playing politics or not doesn’t really matter though.  Romney is right.  More QE won’t resolve our problems.  As I said before QE2 was initiated, this remains a “monetary non-event”.


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • SS

    Romney is just playing politics. This has nothing to do with him understanding MR or not.

  • Frederick

    Smart move. By politicizing QE Romney’s made it impossible for the Fed to make a move before the election.

  • Dave

    Agree with SS.

    Mitt is rightly worried that a rising stock market dooms his chances to defeat the incumbent. It’s not just QE he’s against; it’s any stimulus that might boost the stock market or improve the economy between now and November.

  • MacroTrader

    Definitely a political move but better to be right for the wrong reasons than wrong for the wrong ones.

  • Sam

    After all those years in private equity, Romney can’t be an economic illiterate. He’s shown himself to be a closet Keynesian as well when during the GOP primaries he said that a huge budget cut would send the economy into another recession.

  • Helix12

    Well there you have it. It is politically toxic to embark on QE3 before the election. The stage is set for massive falls in the stockmarket

  • hangemhi

    bingo. That’s what the GOP have been doing since day 1 – trying to make sure nothing gets done to try to make Obama a one term President.

    As for Romney – he was for the stimulus before he was against it. And that’s my problem with him (aside from the fact that I disagree on every single social issue and can’t bare to see another conservative Justice appointed)…. he refuses to stand up for anything that he probably believes in. So maybe he’ll be person A or maybe he’ll be person B if/when elected. How are we supposed to know? Closet keynesian – maybe, but maybe he stays in the closet because the Tea Party has him by the lapels, and the nation is so darn convinced the deficit is killing us.

  • Andrew P

    Bernanke isn’t going to listen to Romney. If Europe lays another egg, Bernanke will print.

  • Charles

    Ben has 17 months left in his term. He could care less about Romney or “politicizing” the process. QE is coming.

  • Panskeptic

    Romney has surrounded himself with a team of Bush retreads. Add a dash of Tea Party to that clusterfork and we’re doomed.

    Y’all up for another 2008?

  • JLM

    Obama is the risk on candidate. Can they keep this thing propped up till late fall?

  • Doomsayer

    Of course not. Romney hopes to allow some deflation so he can by the assets on the cheap.

  • JK

    Sounds like politics to me. If he had explained ‘why’ QE3 is not an optimal policy, then we can give him credit. Otherwise, he’s just trying to win an election. Of course, if he explained why QE3 is not an optimal policy, it might take him down the road of expansionary fiscal policy being the optimal solution. All fine and well for tax cuts, but what about government spending? Best not go there.

  • David

    Romeny has clear Keynesian traits.
    In a TIME interview just a few months ago he dismissed the Tea Party Caucus by saying, correctly, that if he were to implement their deficit-cutting mania right away, he would cause the economy to freefall.

    But as always with Romney, even if he is very intelligent and understands the issues, he is spineless and captive of his base.

  • Dunce Cap Aficionado

    Well, I can’t claim to know Romney’s tactics for trying to get elected, but obviously that is his goal.

    But what we can now say a little more specifically is that if the Fed announces more QE before the election, it could be construed, and most likely will be construed, by many as an anti-GOP action, making it a de facto political action.

    Said another way- Ben won’t let the public think the Fed’s taking its hands out from under its @ss at least until after the election.

  • Johnny Evers

    Everybody seems to believe that QE3 will make the market go up. After all, QE1 and QE2 made the market go up. This is sillly logic, and deep down I’m sure believers know this, but nonetheless they believe that the other guy will act on the belief and drive prices up.

  • Detroit Dan

    David — I’d be interested in a citation for the Romney dissing the Tea Party Caucus. As far as I can tell, he’s embraced their nuttiness in spades, and is desperate to prove that he’s a true believer. Whatever it takes — balanced budget amendment included.

    Romney strikes me as the archtypical empty suit. It saddens me when people I respect pretend the emperor has clothes, that he’s really a closet Keynesian, or other such nonsense. He’s a tool, pure and simple…

  • Detroit Dan

    should be “archetypical”. Sorry for the spelling error…

  • Detroit Dan

    Right. Anyone who thinks that Romney is a closet Keynesian needs to look at his economic advisers. Not exactly the brightest lights…

  • Detroit Dan

    “Bernanke will print”

    Andrew P, I believe you know better. Bernanke may swap assets, but to say that is “printing” shows a fundamental misunderstanding of what QE is…

  • Detroit Dan

    Please. If Romney can’t come out of the closet to win independents and the election, he’s not going to suddenly become brave after he’s elected.

    Just calling him a “closet” anything points to cowardice on his part.

    We’ll see. You could be right and I could be wrong of course…

  • Sam

    Erm…does Greg Mankiw ring a bell?

  • Cullen Roche

    Mankiw, his chief economic advisor is a New Keynesian….