Tags: Forbes | QE | Titanic | Fed

Steve Forbes to Moneynews: Fed's QE Comparable to the Titanic

By Glenn J. Kalinoski and David Nelson   |   Friday, 10 May 2013 02:02 PM

Forbes magazine editor and former presidential candidate Steve Forbes believes Federal Reserve Chairman Ben Bernanke's program of quantitative easing (QE) is comparable to the Titanic.

"In the case of Bernanke, I was in Britain a few months ago and they reminded me that QE stands for Queen Elizabeth, and somebody suggested that instead of calling it QE, call it Titanic," Forbes told Newsmax TV in an exclusive interview.

Forbes noted that the Fed doesn't understand that central banking policy needs to emphasize a stable dollar in order to stimulate a recovery in the economy.

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Without a stable currency, "it's like saying if we float the number of inches in a foot, if we float the number of minutes in an hour, that will stimulate the economy. No, it just mucks things up," he said.

The central bank is purchasing $85 billion worth of Treasurys and mortgage-backed securities every month to support the economy by capping borrowing costs.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"There's never been a time when the [Fed] has positively guided the economy. It's always a disaster when they try to guide the economy, and we see it here," he explained.

"QE, or Titanic, whatever you want to call it, is contracting the economy," he added.

"You know of price controls? When you artificially lower the price of something, you get less of it. The same is true of credit," he said.

"By artificially lowering the price of credit, the government never has a problem, big companies never have a problem, but small businesses — very uncertain line of credit. Only now are they beginning to get a little more credit."

Forbes maintained that the Fed has mispriced credit so much that it doesn't reach the marketplace.

"If you had a clear market, it would get out there. Just as when the Fed doesn’t muck around with the price of credit ... you get good pricing if people can get it," he said.

"In terms of credit to smaller entities, [it's] very difficult combined with regulators taking the attitude that a loan to a drycleaner isn’t as good as a loan to the Greek government. [It] begs the question what did you create it for in the first place, unless this was a backdoor bailout of big banks," he stated.

"It's not getting out to the entities that create jobs. You call that a success? I don’t think so."

Regarding healthcare, Forbes believes Obamacare will eventually collapse of its own weight.

"It'll look like a mess," he said. "You're having a growing physician shortage in the next few years."

He also noted that insurance costs are increasing.

"If you're a young person — when you think you're invulnerable, you're immortal — are you going to pay a $95 fine or are you going to pay $5,000 to $7,000 for an insurance policy that you don’t think you need?" Forbes explained.

"They write these crazy laws, crazy regulations, make it hideously expensive. You're going to have a few bureaucrats and politicians in Washington with a spreadsheet thinking they know something as complex as healthcare? Give me a break," he added.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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