Tags: Stephen | Roach | Fed | Grand | Experiment | Flop

Stephen Roach: Fed’s Grand Experiment a Flop

Monday, 13 Dec 2010 08:07 AM

The Fed's strategy of printing even more money despite little evidence that the first round has worked has been a flop, one the markets are quickly judging a failure, says Stephen Roach, non-executive chairman of Morgan Stanley, Asia.

“They’ve gotten the opposite result. The 10-year (Treasury bond) is backed up between 60 and 70 basis points, and if anything that takes out of economic growth rather than adding to it,” Roach tells CNBC.

“The markets, I think, are rendering a very negative verdict on the Fed’s grand experiment.”

Fifty-four percent of all Americans now believe the Fed should be either abolished or seriously constrained, Roach said, up 10 percentage points from just a month ago.

Roach said that he doesn’t believe the Fed should be shut down, but said that the poll suggests a serious gap between policy and its effects.

“I think the Fed has really got some seriously explaining to do to the markets and to the public, and I for one am really displeased with what they are doing,” he said.

The Fed’s latest unconventional easing — money printing — and Obama’s tax deal with the GOP, which included fiscal stimulus via payroll tax cuts, are both trying to achieve the same goal, Roach said.

“The intent of policymakers is the same, to jumpstart a moribund U.S. economy with a very, very high, unacceptably high, unemployment rate,” Roach said.

“What’s happening is the policies don’t seem to be working, and that is the bigger question, the deeper question for the markets and for the economy,” he said.

At least one major market player believes the Fed’s actions are making change.

Pimco, the bond giant, has moved its growth target higher, to between 3 percent to 3.5 percent in the fourth quarter of next year from the same period of this year.

That compares with its previous estimate for 2 percent to 2.5 percent growth.

“The U.S. is using fiscal and monetary policy to try to attain escape velocity for the economy,” Mohamed El-Erian, chief executive officer of Pimco, told Bloomberg News.

“What we don’t know yet is whether that will be enough not just to change the economy’s trajectory for one year but to place it on a medium-term sustainable path,” El-Erian said.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
StreetTalk
The Fed's strategy of printing even more money despite little evidence that the first round has worked has been a flop, one the markets are quickly judging a failure, says Stephen Roach, non-executive chairman of Morgan Stanley, Asia. They ve gotten the opposite result....
Stephen,Roach,Fed,Grand,Experiment,Flop
374
2010-07-13
Monday, 13 Dec 2010 08:07 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