Tags: Wiedemer | fed | Easing | economy

Wiedemer: More Quantitative Easing May Be on Horizon

Tuesday, 09 Aug 2011 04:40 PM

Don't be surprised if the Federal Reserve rolls on a fresh round of quantitative easing in an effort to spur more robust economic growth down the road, says Robert Wiedemer, financial commentator and best-selling author of "Aftershock."

Stimulus measures carried out by the Obama administration masked the reality that the economy remains stuck in rut of slow growth.

"In my view, we've really just been in a suspended recession since 2009. After our bubble economy popped in 2008 or 2009, the government went in and did massive borrowing and fiscal stimulus. They did massive money printing and monetary stimulus. And that's really suspended the recession," Wiedemer tells Fox Business.




"I think we are really doing is unmasking the real economy that's always been there, that we've been able to overlook with all this stimulus," says Wiedemer, managing director of Absolute Investment Manager.

The Fed has already unveiled two rounds of quantitative easing — where it buys assets from banks to keep interest rates low and stock prices climbing — with the latest program, known widely as QE2 wrapping up on June 30.

Don't be surprised to see a QE3 in some shape or form.

"I think, honestly, that we've got a little ways to go because I think the Federal Reserve has got their finger on the printing press," says Wiedemer, who recently released an updated edition of his best-selling book, "Aftershock."

"I think they are going to use it one more time, at least, and I think it will have an effect on the stock market."

"Some version of it. I would say a QE3 is coming. Certainly if this market goes below 10,000."

Critics says quantitative allows the Fed to print money and pump it into the economy and pressure inflation rates up and weaken the dollar in the process.

Don't shoot the messenger

Turning to Standard and Poor's and its decision to downgrade the U.S. to AA-plus from AAA, Wiedemer says the agency does not deserve the criticism it is facing.

Administration officials have said Standard and Poor's used poor mathematical assumptions when calculating U.S. risk.

Whatever. The country deserves the downgrade for borrowing too much and not doing enough to cut deficits and future spending, Wiedemer says.

"If you focus on S&P, you're blaming the messenger and not the message. Bottom line is this is a lightning bolt in front of the storm. It should be a wake-up call to tell us this problem is not our children's problem, this is our problem."

The Fed has said it will at least stick with loose monetary policies for another two years, and won't roll out a QE3 for now.

At its monthly meeting in August, the Federal Open Market Committee, which sets rates, says it will be ready to resort to more measures should the economy need it but for now, it's just going to stick with low rates.

The decision wasn't unanimous.
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Three officials, Richard Fisher of the Dallas Fed, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, voted against the decision to pledge rock-bottom interest rates until mid-2013, according to Reuters.

It was the first triple dissent against a decision by the policy-setting Federal Open Market Committee since November 1992.

"The committee currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013," the Fed says, Reuters reports.

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Don't be surprised if the Federal Reserve rolls on a fresh round of quantitative easing in an effort to spur more robust economic growth down the road, says Robert Wiedemer, financial commentator and best-selling author of Aftershock. Stimulus measures carried out by the...
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Tuesday, 09 Aug 2011 04:40 PM
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