Tags: Pimco | El-Erian | Fed | Launch | QE3 | easing

Pimco’s El-Erian: Fed Will Launch QE3 Soon

Monday, 08 Nov 2010 08:06 AM

The Federal Reserve's plan to buy $600 billion in bonds won't help the economy much, so the country should prep for fresh rounds of similar actions from the monetary authority, says Mohamed El-Erian, co-head of Pimco, the world's largest bond fund.

The move, known as quantitative easing, is defined as when the Federal Reserve buys debt held by banks, thus freeing them to invest.

Yet this latest round, the second of its kind, will encourage banks to invest money abroad and fails to fundamentally boost the economy, El-Erian writes in the Financial Times.

"Without meaningful structural reforms, part of the Fed’s liquidity injection will leak right out of the U.S. and result in yet another surge of capital flows to other countries," he wrote.

"The rest of the world does not need this extra liquidity."

With little change at home, the Fed will carry out a third round of quantitative easing to get the U.S. economy going again.

“With domestic outcomes again falling short of policy expectations, it is just a matter of time until the Fed will be expected to do even more,” El-Erian wrote.

President Barack Obama is currently touring Asia, where concerns are arising over the Fed's policies that are strengthening other nation's currencies and thus making their exports more expensive.

Chinese Finance Minister Zhu Guangyao has said the second round of quantitative easing has pumped too much hot money into the global economy.

“Around the world we have $10 trillion of hot money flowing around,
more than the $9 trillion in hot money at the beginning of the global financial crisis,” Zhu says, according to Bloomberg.

The U.S. “has not fully taken into consideration the shock of excessive capital flows to the financial stability of emerging markets.”

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
StreetTalk
The Federal Reserve's plan to buy $600 billion in bonds won't help the economy much, so the country should prep for fresh rounds of similar actions from the monetary authority, says Mohamed El-Erian, co-head of Pimco, the world's largest bond fund. The move, known as...
Pimco,El-Erian,Fed,Launch,QE3,easing
291
2010-06-08
Monday, 08 Nov 2010 08:06 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved