Tags: rogers | fed | bernanke

Rogers: Loose Fed Policy Is Bad for US Economy

Wednesday, 25 April 2012 03:48 PM

The Federal Reserve's loose monetary policies, which the central bank maintained Wednesday, have rewarded America's bad habits of spending too much and not paying down enough debt, says noted international investor Jim Rogers.

The Fed left its benchmark lending rate target near zero and while there are no plans to roll out fresh stimulus measures such as quantitative easing — bond buybacks from banks designed to jolt the economy by pushing down long-term interest rates — the Fed won't rule them out either.

Since the downturn, the Fed has purchased $2.3 trillion in Treasury bonds and mortgage-backed securities from banks to spur recovery, dubbed by critics — including Rogers — as printing money out of thin air.

"What they are doing now is rewarding the people who are the spendthrifts, who made serious mistakes at the expense of the savers and the investors," Rogers tells Reuters in a videotaped interview.  "This is not good for America."

"I hope, I hope that there are people in the Federal Reserve who know that they should let the market determine interest rates and they should stop manipulating the currency, the markets, the interest rates and everything else."

As a side effect, quantitative easing weakens the dollar, threatens to pump up inflation rates and adds to the country's debt burdens as well, Rogers adds.

"The Fed is making the world much worse; they are making the United States worse, they're borrowing huge amounts of money," Rogers says.

"Five years ago the Federal Reserve had about $800 billion of government bonds on its balance sheet. Now it has four times that of garbage. Somebody has got to pay for that."

Rogers reiterated his previous forecasts that the U.S. is headed for another recession, thanks to the country's heavy debt burdens.

At a press conference on Wednesday, Federal Reserve Chairman Ben Bernanke said while there are no plans to consider quantitative easing at this time, it cannot be ruled out.

"We remain entirely prepared to take additional balance sheet actions if necessary to achieve our objectives," Bernanke said at a news conference, according to CNBC.

"Those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support."

The Fed's monetary policy body, known as the Federal Open Market Committee (FOMC) did express some optimism, saying it expects the U.S. economy to grow between 2.4 percent and 2.9 percent in 2012, slightly higher than a January forecast of growth between 2.2 percent and 2.7 percent.

Unemployment, currently at 8.2 percent, will hover between 7.8 percent and 8 percent at year's end, representing some improvement.

"The Fed has not changed its cautionary view of the economy and is keeping its potential support mechanisms ready should they become needed," says Joseph Trevisani, chief market strategist at Worldwide Markets, Woodcliff Lake, New Jersey, according to Reuters.

"It is likely that the chairman will not voice any deeper concerns for the economy than have been expressed already in the FOMC statement and the Fed economic projections."

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Wednesday, 25 April 2012 03:48 PM
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