The Federal Reserve's latest stimulus effort will drive the dollar "through the floor," Peter Schiff, CEO of Euro Pacific Capital, told CNBC.
"This is a disastrous monetary policy; it’s kamikaze monetary policy,” Schiff told CNBC “The dollar index is going to go down to 40, it might even go to 20 - I mean this is going to be in free fall at some point … ultimately there’s going to be a currency crisis.”
In the third round of quantitative easing (QE), the Fed says it will buy $40 billion of mortgage-backed securities a month to push down mortgage rates, revive the economy, and decrease unemployment.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
Schiff, a long-time dollar bear, called that debasing the dollar and printing money.
“What we actually need is less money printing," Schiff told CNBC. "We need higher interest rates, more savings, more production, more exports and what the Fed is doing is inhibiting that from happening."
However, Sean Callow, a strategist at Westpac Bank in Sydney, told CNBC that, although a weaker dollar is a side-effect of QE3, the Fed can take other actions to strengthen the dollar.
The Fed said it will buy mortgage bonds and perhaps other assets until unemployment improves, the first time it has linked its policies to economic objectives, according to The New York Times. Unemployment has remained stuck at over 8 percent, while annual inflation is below the Fed's annual target of 2 percent.
“The weak job market should concern every American,” Fed Chairman Ben Bernanke said at a news conference, saying the monetary easing is meant to create jobs, according to The New York Times.
The Fed's QE3 announcement prompted the Standard & Poor’s 500 Index to jump 1.63 percent, meeting the Fed's objective of pushing money into riskier investments, The Times noted.
Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.
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