The Federal Reserve should withdraw its massive stimulus soon, says Morgan Stanley Asia Chairman Steve Roach.
“There is never an easy time to do it,” he told Bloomberg.
“The longer they wait, the greater the chance they sow the seeds for the next bubble. So I’m in favor of an early exit strategy.”
The Fed has announced its intention to keep interest rates very low for some time.
“We’ve seen the most extraordinary monetary stimulus on record in the 15, 16 months post-Lehman Brothers’ (collapse),” Roach said.
“We’ll have to see the most extraordinary withdrawal of stimulus on record. . . . If this recovery is as strong as Bernanke and markets think it is, the time to exit is now.”
To be sure, Roach isn’t too confident that the economic recovery is indeed solid.
“There are four key reasons to remain skeptical about the vigor and sustainability of any rebound in the global economy,” he wrote in a column on Bloomberg.
• “The financial crisis itself is far from over.”
• “The breadth of this global recession was staggering.”
• “The demand side of the global economy is likely to be restrained by a protracted pullback of the over-extended American consumer.”
• “The supply side of the global economy suffers from massive imbalances.”
Star bank analyst Meredith Whitney shares Roach’s pessimism. It’s the government that has kept the economy afloat, she told CNBC.
“I think they're out of bullets."
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