In a speech Monday, Federal Reserve Governor Kevin Warsh questioned whether the government's decision to spend $600 billion on bonds would have lasting positive effects on the economy, the Associated Press reported. The comments are somewhat surprising considering that Walsh, an ally of Chairman Ben Bernanke, voted for the plan.

Speaking at the annual meeting of the Securities Industry and Financial Markets Association in New York, Warsh said government bond buying could cause longer term inflation because of a weakening dollar and higher commodity prices. The government may be better off reforming the tax code to incentivize companies to boost investment, he added. "Additional monetary policy measures are, at best, poor substitutes for more powerful pro-growth policies," he said.

Walsh's speech continues a long-standing debate about the effectiveness of the Fed's aggressive monetary policy. The Federal Reserve last week launched the second phase of its quantitative easing program, the so-called QE2.

Last month, Kansas City Federal Reserve President Thomas Hoenig broke ranks with some of his fellow regional Federal Reserve executives by warning against further monetary action, saying it would create currency volatility that would outweigh the potential benefits of lowering already low interest rates. Hoenig voted against last week's stimulus plan.

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You do understand the Fed can both maketh AND taketh away these dollars. With the threat of inflation, investing should be stimulated as it will no longer make sense to just hoard dollars as they will decrease in value. As the economy begins rolling again, the fed can taketh away those dollars again at a controlled pace.

November 09 2010 at 10:30 AM Report abuse rate up rate down Reply

It is all part of a plan to bring down the dollar and create one world's currency. Geither said that back when he was selected by Obama. I bet George Soro is behind this. He made billions collapsing England's currancy. We have to somehow stop the Fed but don't know how. We are screwed!!

November 09 2010 at 4:06 AM Report abuse -1 rate up rate down Reply

"Government Bond buying COULD cause inflation?!" Sounds like 'someone' in the media is preparing us for the worst. Food prices are set to soar,as are oil and clothing prices because of Bernanke's idiocy. GREAT DEPRESSION # 2 is here!!!

November 09 2010 at 3:57 AM Report abuse rate up rate down Reply

The moment the FED did another stimulus (quantitative easing), inflation set in! Watch GOLD, as it is over $1,400./oz on its way to $1,500.00 by Summer (if not sooner if our economy would collapse)!

November 09 2010 at 3:52 AM Report abuse rate up rate down Reply
Samir semaan

With the new political climate it will be difficult for the unemployment benefit given to american people made more difficult specially now with more forclosures looming on the horizon the norm is that the two parties must work together to achieve the results necessary for the economy.

November 08 2010 at 11:36 PM Report abuse rate up rate down Reply