Tags: Romick | Fed | easing | failure

FPA Crescent’s Romick: Fed Easing Doomed to Failure

By    |   Friday, 22 Jun 2012 01:08 PM

The Federal Reserve’s massive monetary accommodation won’t end up helping the economy, says Steve Romick, manager of the FPA Crescent Fund.

“We have never executed policy like we are doing now,” he tells Morningstar.com. Romick was referring to the Fed’s decision to keep interest rates near record lows and expand its balance sheet to $2.9 trillion

“How it ends is anybody's guess. But just in simple terms, I think by avoiding the ability to clear [financial asset] prices at a normal low level as has happened in the past, the Fed is trying to step in and manage risk assets to too great a degree,” he says.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

“I don’t think it's going to end well.”

The Fed is essentially managing the stock market, Romick says. When the central bank conducts each round of its quantitative easing, stocks go up. And then equities fall back once the operation ends.

“The Fed is managing through this in a way that's going to have some severe ramifications,” he says. Eventually interest rates will rebound, which will mean big trouble, he says.

Many experts agree with Romick that Fed easing is counterproductive at this point.

"The more you tell people that interest rates are going to be low for a really long period of time, the more they'll think that growth and inflation are going to be very low,” independent economist Bob Brusca tells Yahoo. And then people make that a self-fulfilling prophecy.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans




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2012-08-22
Friday, 22 Jun 2012 01:08 PM
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