The Federal Reserve's loose monetary policies have been "hideous" for recovery and will do more harm to the economy than good, says investment banker Christopher Whalen.
Since the downturn, the Federal Reserve under Chairman Ben Bernanke has cut interest rates to near zero and pumped $2.3 trillion into the economy via buying bonds from banks to stimulate the economy.
The Fed has also reshuffled its Treasury portfolio to even further ensure long-term interest rates stay low.
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Critics say such policies will only fuel inflationary pressures down the road and haven't created more investment and hiring that they were supposed to do in the first place.
Plus the rise in food and oil prices, critics also charge, stems in part from all of that excess liquidity finding its way into commodities markets.
"That's a hideous, hideous policy mix because it hurts the people in our economy with the lowest incomes. They see it at the grocery store, they see it in inflation for basic goods," Whalen tells Newsmax.TV in an exclusive interview.
"We need to have a much more honest conversation about the tradeoff between inflation and real growth," says Whalen, co-founder and vice chairman of Lord, Whalen LLC, parent of Institutional Risk Analytics, the Los Angeles-based provider of bank ratings, risk management tools and consulting services for auditors, regulators and financial professionals.
Federal Reserve bond buybacks, known officially as quantitative easing but dubbed by critics as printing money out of thin air, are designed to steer the economy away from deflationary decline via Fed intervention and eventually foster demand.
While most agree the best way to spur recovery is by increasing demand, disputes arise over how to get there, with liberals arguing for government intervention and conservatives often pushing for tax breaks and incentives to get the private sector moving again.
Both parties have resorted to fiscal tools to fiddle with the economy.
The White House under both Presidents George W. Bush and Barack Obama have rolled out stimulus spending programs to prop up the economy, with Bush passing the Troubled Asset Relief Program (TARP), which bailed out the banks, while Obama pushed through the American Recovery and Reinvestment Act of 2009, which used government spending to spur growth.
Previous administrations have rolled out similar measures as well.
"We used fiscal policy and monetary policy to kind of keep the game going and also create some booms: technology and housing being the most notable. Today, though, I think we need to go back to basics, which is about wealth creation and production. And that's the only way we are going to rebuild our economy in a sustainable way," Whalen says.
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