Tags: Economist | Apoteker | QE3 | Lethal | Cocktail

Economist Apoteker: QE3 Would be 'Lethal Cocktail'

By    |   Friday, 10 Jun 2011 01:59 PM

The U.S. economic slowdown has some experts calling for another round of quantitative easing by the Federal Reserve – QE3. Thierry Apoteker, chief economist at TAC Financial, disagrees.

He tells CNBC that a QE3 program could turn into a disaster for bonds.

"If you have fiscal policy that is loose and monetary policy that is loose, and commodity prices rising, then you have the recipe for a very lethal cocktail on the bond market," Apoteker says.

QE3 is unnecessary because a double-dip recession isn’t in the cards, he maintains. What he expects instead is sub-par economic growth of about 2.5 percent to 3 percent this year and next.

As a result, “there is no need for substantial monetary easing,” Apoteker says. “If you have QE3 it won’t support demand any more than it [QE2] is today.”

Treasury yields already should be higher than current levels, he says. The 10-year Treasury yield should equal nominal GDP growth, now about 4.5 percent. But that yield stood at 3.02 percent Tuesday.

Others agree with Apoteker that QE3 is unnecessary. Deutsche Bank strategist Alan Ruskin sees “at least eight good reasons” to keep the Fed from acting, he writes in a note obtained by the Financial Times.

That includes the fact that the “extent of the slowdown is poorly understood” and the need for the Fed to “store ammunition” in case the economy slumps again in coming years, Ruskin says.

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The U.S. economic slowdown has some experts calling for another round of quantitative easing by the Federal Reserve QE3. Thierry Apoteker, chief economist at TAC Financial, disagrees. He tells CNBC that a QE3 program could turn into a disaster for bonds. If you have...
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2011-59-10
Friday, 10 Jun 2011 01:59 PM
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