Tags: Mobius | Bernanke | fed | Easing

Mobius: Bernanke Still Has ‘Foot on the Pedal’ for More Easing

Wednesday, 11 April 2012 01:44 PM

The Federal Reserve has been officially silent on whether or not the economy needs fresh shots of extraordinary stimulus measures, although the U.S. central bank won't take steps to tighten anytime soon, says Mark Mobius, executive chairman of Templeton Emerging Markets Group.

The Fed has pumped trillions of dollars into the U.S. economy by buying bonds held by banks, a policy officially known as quantitative easing but dubbed by critics as printing money out of thin air.

The Fed has rolled out two rounds of easing since the downturn with the aim of steering the country away from deflationary spiral and encouraging hiring in the process.

Editor's Note: Study: Bernanke Intentionally Devalued the Dollar

Weak unemployment rates have markets whispering a third round may be on the way, which wouldn't be a problem either way, Mobius says.

Mopping up liquidity from past easing rounds would be a problem and would bruise stocks everywhere.

"The end of quantitative easing would not be a problem. It's if they decide to contract, in other words, decide to take money off the table — reduce the amount of money in circulation," Mobius tells CNBC.

"Then that would be a problem for everybody because, of course, there won't be enough money to move into the equities and bonds and other investments around the world. I doubt if that will happen, though."

Federal Reserve Chairman Ben Bernanke has repeated that conditions warranting accommodative policies will stick around through 2014.

"I think Bernanke still has got his foot on the pedal and wants to make sure that the unemployment comes down and that's true of other countries around the world," Mobius says.

"The Europeans, Japanese, Chinese — they still want to see good growth although they are cautious about inflation."

The Federal Reserve remains officially silent on the need for fresh easing, although some Fed officials say in their own opinion they recognize concerns that easing will pump up inflation rates down the road.

“I’m just reporting what I hear on the street, which is a real concern that with our expanded balance sheet, we are just a little bit in an ember of what could become an inflationary fire,” says Federal Reserve Bank of Dallas President Richard Fisher, according to Bloomberg.

Many business leaders are saying, “please, no more liquidity,” Fisher says.
Excess liquidity stemming from loose Federal Reserve policies tends to end up in emerging markets, stocks especially.

Editor's Note: Study: Bernanke Intentionally Devalued the Dollar

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Wednesday, 11 April 2012 01:44 PM
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