Today, an open letter to Fed Chair Ben Bernanke appeared via the Wall Street Journal questioning the wisdom of the Fed’s round two of quantitative easing. It’s signed by 23 economists, financial writers, fund managers and others, including, to name just a few…
* Richard X. Bove of Rochdale Securities* Jim Chanos of Kynikos Associates* Niall Ferguson of Harvard University* James Grant of Grant’s Interest Rate Observer* Seth Klarman of Baupost Group* David Malpass of GroPac* John B. Taylor of Stanford University
It’s a group that would not necessarily agree on wide range of issues, but that’s on the same page when it comes to QE2 and the destruction it could potentially unleash on the US economy and wider financial markets.
Here’s a part of the text, as published in WSJ:
“We believe the Federal Reserve’s large-scale asset purchase plan (so-called ‘quantitative easing’) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment…
“…We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.
“The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.”
The signatories are members of a group named, e21: Economic Policies for the 21st Century, so are in some way previously organized. However, they still seem to represent at least part of a rising and mainstream current of criticism directed toward the Fed’s ambitious, unpredictable, and most likely ill-fated plan. In the political sense, the outcry came most quickly and loudly from leaders abroad, but the dissent now also appears to be growing increasingly fervent at home. If nothing else, the letter represents more collaborative outrage than we saw with the first round of QE, so, at least in that sense, it’s a start…
You can read the full text of the open letter, the complete list of signatories, and a Fed spokeswoman’s rather boilerplate-sounding response, in the Wall Street Journal’s post on an open letter to Ben Bernanke.
Rocky Vega,The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
What makes anyone think that Bernanke is buying the Treasuries to stimulate inflation. Because he says so? I think he has no choice to make the purchases because the budget deficit requires financing. China is cutting their losses and downsizing their purchases. Japan, I assume, is aware of their dangerous exposure to the dollar. Treasuries are sucker bait.
One day even the so-called Middle Class (now downgraded to Low Class) will wake up to the dollar scam and dump FRN’s. Then things will get get very interesting…
23 Financial minds. Isn’t that some sort of (fill in the blank)
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