However well intentioned it may be, the Fed's strategy is wrong, says Morgan Stanley Asia CEO Stephen Roach.
The fed’s most recent action — committing to buy $300 billion of Treasuries — is about the 20th bold move Ben Bernanke has made, Roach observed.
“I am not trying to throw cold water on what they are doing, but you have to step back and ask yourself strategically, what is the end game here?” Roach told CNBC.
“Are we really trying to produce another round of debt-funded consumer spending by an overly indebted American consumer? This is the mess that got us into trouble in the first place and do we want to go back again.”
The Fed believes time is on its side, so it doesn't need to worry about creating inflation in the near term, Roach notes.
"Their goal is to kick start the US economy,” he says. “One of these days, we will hit the bottom and there will be something of a turning point.”
“And if they are trying to kick start the U.S. economy with increasing the appetite for borrowing by overly indebted American consumers, the risk is that they are making a huge strategic mistake."
Asian stocks rose for the fifth day, the longest winning streak since the start of the year, after the Fed’s action, Bloomberg reports, apparently stoking optimism that lower borrowing costs will end the first global recession since World War II.
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