Angela Merkel speaks (uncommon) common sense to Obamaian profligacy

Merkel for the Fed The German leader's welcome rebuke to central bankers.... another miracle for the ages: A politician demanding tighter money. We refer to German Chancellor Angela Merkel, who in a Berlin speech Tuesday rebuked the world's central bankers, notably including the U.S. Federal Reserve, for being too politically accommodating. ..."The independence of the European Central Bank must be preserved and the things that other central banks are now doing must be retracted," Mrs. Merkel told a meeting ... "We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years' time."... "I view with a great deal of skepticism the extent of the Fed's powers."Usually when a politician lobbies a central bank, it's to demand easier money.... she no doubt knows that the Weimer inflation of the 1920s paved the way for Hitler....this is the second time Mrs. Merkel has volunteered to be the designated driver amid the G-20's fiscal and monetary binge. Three months ago, she led a revolt against President Obama's demand that Europe follow his Keynesian spending spree. Her spending restraint is already looking wise as the U.S. asks the world to finance a debt burden rising to World War II levels.... she's taking aim at monetary excess, ...She also rightly fingered "monetary policy in the United States" that was "politically supported" as a main cause of the current mess.... Fed Chairman Ben Bernanke... said he "respectfully" disagreed, adding that, "The U.S. and global economies, including Germany, have faced an extraordinary combination of a financial crisis . . . plus a very serious downturn. I am comfortable with the policy actions that the Federal Reserve has taken."
... the Fed clearly needed to counter the declining velocity of money amid the autumn and winter panic. We've also given Mr. Bernanke the benefit of the doubt on some of his liquidity interventions. But the Fed has since elbowed its way into fiscal policy by buying housing and other dodgy assets, and it is also directly monetizing federal debt by buying Treasurys. The latter move appears to have had the opposite of its intended effect, scaring the world's investors to bid up long-term rates for fear the Fed has sold its independence to Congress and the White House. The Fed should call a halt to such purchases at its monetary policy meeting later this month....the world is wondering when the Fed will start to remove the flood of money it has injected into the economy during the crisis. Mr. Bernanke says not to worry,... But this is cold comfort given ...The Fed's habit .. to look at backward indicators, such as the cost-of-living index and the jobless rate, rather than at currency and commodity prices that can warn of asset bubbles and inflation ahead. This is precisely the mistake...made in 2003,....The warning that Mrs. Merkel -- and China and the financial markets -- is sounding is whether the Fed will have the political courage to start removing that liquidity even if the unemployment rate is high, and before it creates another mess....yesterday Mr. Bernanke preferred to do some fiscal policy moonlighting. "Unless we demonstrate a strong commitment to fiscal sustainability in the longer run," he said, "we will have neither financial stability nor healthy economic growth." We can see why Mr. Bernanke would want to change the subject from his own monetary responsibilities, but he'd be wiser to heed Mrs. Merkel.