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The Federal Reserve's new $600 billion monetary stimulus plan is designed to spur the country's sluggish economic recovery. But the central bank's program is now encountering a growing backlash both at home and abroad.
"I would say that Bernanke is fundamentally wrong, that he is running -- he is fundamentally misreading the economy. This economy lacks confidence in the government. It doesn't lack cash," former House Speaker Newt Gingrich told ABC's George Stephanopoulos Tuesday on "Good Morning America."
Under the plan dubbed QE2 -- which stands for quantitative easing -- the Fed will buy $600 billion worth of government bonds in a bid to make loans cheaper and get Americans to spend more. Doing so is designed help the economy and prompt companies to boost hiring.
The top Republican on the Senate Banking panel told ABC News that he is "worried" about the Fed's plan.
"While I share Chairman Bernanke's concern regarding the condition of the economy, I am worried about the risks associated with his actions," said Sen. Richard Shelby of Alabama. "However, Chairman Bernanke would not be in this position had President Obama and the Democrats used their power to enact pro-growth policies. Instead, they have grown government and created the most anti-business regulatory environment our country has ever seen."
The comments come on the heels of former Republican vice-presidential candidate Sarah Palin's calls for the Fed to "cease and desist" with its new plan.
"It means our government is pumping money into the banking system by buying up Treasury bonds. And where, you may ask, are we getting the money to pay for all this? We're printing it out of thin air," Palin told a trade association convention in Phoenix on Monday, according to the National Review.
"And if it doesn't work, what do we do then? Print even more money? What's the end game here?" she asked. "Where will all this money-printing on an unprecedented scale take us? Do we have any guarantees that QE2 won't be followed by QE3, 4, and 5, until eventually -- inevitably -- no one will want to buy our debt anymore? We shouldn't be playing around with inflation."
Skepticism about the plan is even rife within the Fed itself.
Kevin Warsh, a member of the Fed's board of governors, praised the program as "necessary limited, circumscribed, and subject to regular review." At the same time, he expressed reservations about the program earlier this week.
"The Federal Reserve is not a repair shop for broken fiscal, trade, or regulatory policies," Warsh wrote in the Wall Street Journal. "Given what ails us, additional monetary policy measures are poor substitutes for more powerful pro-growth policies. The Fed can lose its hard-earned credibility -- and monetary policy can lose its considerable sway -- if its policies over-promise or under-deliver."
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