Rep. Erik Paulsen, R-Minn., and three of his Republican colleagues in the House sent a letter to Federal Reserve Chairman Ben Bernanke on Friday warning him that the pattern of the Fed “creating dollars” to cover U.S. debts would likely have longterm negative consequences on the economy. Pumping the Treasury Department with newly printed money “gives markets a short term boost at the expense of debasing the dollar and triggering inflation,” the letter states.
The letter also warns that foreign lenders like China and Japan may be less likely to do business if the trend continues and notes that the U.S. could lose its AAA credit rating like the British government. Click on the image to the left to read the full text of the letter.
Paulsen wrote on his blog on Monday afternoon that, “Rather than creating new money to pay for our debt, Congress needs to cut spending and reduce borrowing. In other words, we need to start paying down our national debt with money we actually have.”