The Federal Reserve's massive easing program hasn't done much to boost economic growth and may be sparking inflation, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.
"Five years after the beginning of the economic recovery, after rock-bottom interest rates and trillions of dollars of quantitative easing by the Federal Reserve, the economy is growing about 2 percent," she writes in an article for
MarketWatch.
GDP expanded 1.9 percent last year.
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Countries that print a lot of money and weaken their currencies don't succeed economically, says Furchtgott-Roth, a former chief economist of the U.S. Department of Labor. "No country has attained prosperity by printing money and weakening its currency, and the United States appears to be no different."
The dollar has dropped approximately 15 percent against the euro since Ben Bernanke began as Fed chairman in February 2006.
"Monetary stimulus might be useful in the initial stages of a recession and recovery, but zero percent interest rates for years on end are a different matter altogether," Furchtgott-Roth writes.
Meanwhile, if the Fed doesn't withdraw its easing fast enough when the economy rebounds, inflation can rise, she explains. "This may be happening already."
Consumer prices rose 0.3 percent in April, the biggest increase in 10 months, and producer prices jumped 0.6 percent.
"Sluggish economic growth and early signs of inflation show that the Fed should be wary of continuing its zero-rate policy. Once present, inflation is hard to rein in," she notes.
Meanwhile, the central bank may soon have trouble functioning normally. The Fed Board is supposed to be made up of seven governors. But as of May 28, it will only have three, unless the Senate approves at least one of President Obama's three nominees before then.
On that date Fed Governor Jeremy Stein is leaving the central bank. A drop to three governors would be a first in Fed history and threatens to greatly hamper the institution,
The New York Times reports.
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