Tags: nouriel | Roubini | Fed | bernanke | easing | help

Roubini: Fed's $600 Billion Gamble of Little Help

By    |   Thursday, 04 Nov 2010 09:40 AM

Even before the Federal Reserve announced its second round of quantitative easing (QE2) Wednesday, ace economist Nouriel Roubini predicted the move would do little to help the economy.

The Fed will purchase $600 billion of Treasuries as part of its new easing program. “There are several reasons to expect the effects of QE2 on growth to be contained,” Roubini and several of his colleagues at Roubini Global Economics write in Forbes.

“At the margin the chances of the U.S. falling into a double dip are reduced.”

But, they write, “We continue to stress that household balance-sheet repair will continue to dictate the pace of the recovery and that liquidity can only have a limited impact and cannot be a solution to solvency issues.”

The end of fiscal stimulus and inventory re-stocking will restrict growth next year, they say. “House prices are projected to correct downward in 2011, and consumer spending will remain anemic.”

The result? “These factors point to anemic growth and easing inflation in 2011,” Roubini and his colleagues write.

Economic consultant Leonard Santow says the Fed, reacting to the failure of fiscal policy, is simply compounding the problem.

“The main problem is on the fiscal side, and there is nothing wrong with the Fed chairman making budget recommendations and admitting there is not a great deal left for monetary policy to achieve when it comes to stimulating the economy,” he told The New York Times.

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Even before the Federal Reserve announced its second round of quantitative easing (QE2) Wednesday, ace economist Nouriel Roubini predicted the move would do little to help the economy. The Fed will purchase $600 billion of Treasuries as part of its new easing program. ...
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2010-40-04
Thursday, 04 Nov 2010 09:40 AM
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