QEII follow-up: why do people hate the idea?
Philip W., a loyal MR reader, asks:
First, Interfluidity is a wise man.
Second, I believe the price of gold is high because of "financial-existential risk," not because of inflation per se. The U.S. dollar and debt are no longer unambiguously safe and is there any real solution to the triple menace of highly leveraged banks, moral hazard, and financial strategies of extreme negative skewness? It remains to be seen. Given the forthcoming flow of debt finance required to keep Uncle Sam up and running, lots of inflation today wouldn't maximize political rents to leaders or medium-term seigniorage.
Third, the libertarian right is having a hard time seeing the Fed as a relative ally over the last three years, which it has been. That admission implies an unappetizing shift in the goal posts for what is possible, and that sounds like a intellectual surrender to a lot of people I know. I think they are in denial. One alternative to acceptance is to view the Fed as sinister, which then leads you to fear anything they do, including QEII, their current major monetary policy initiative.
Fourth, trust in government is at an especially low level and so monetary policy is viewed through this lens. You need not have absolute trust in government (ha) but I doubt if government today is significantly more sinister, if at all, than in recent times past. Possibly Obama is an arrogant man who wishes to lower your relative status in the broader scheme of things (at least with some "p" this is true), but don't let that influence your analysis of his policies or the policies affiliated with him. Keep your eye on the ball – most of all markets are telling us that future inflation just won't be that high.
Addendum: Scott Sumner makes many interesting points on related issues.