Former Federal Reserve Governor Kevin Warsh said the risks
involved with further quantiative easing are outweighed by the
benefits, which he sees as modest at best.
"The Chairman has gone all in," Warsh said, in a Friday morning
interview on CNBC.
Warsh, now a fellow at Stanford's Hoover Institution, called
further easing "immodest move by a modest man" referring to Fed
Warsh says that the known economic risks of the European debt
crisis, the softness in Asia, and the weakness in the U.S. have
been known for some time. He wants to know what the Fed knows that
would make it take such a risky approach.
"It has to be more than just the U.S. unemployment rate. I worry
that the Fed knows something about the economy that it's not
telling," he stated.
Warsh sees the Fed as trying to boost an economy with measures
that will prove to be ineffective. He thinks the problem is fiscal
not monetary policy.
Most interesting, Warsh stated that Apple's (NASDAQ:
) iPhone 5 would have a more positive effect on the economy than
additional Fed easing.
"Washington should focus more on the long-term. The private
sector is better at asset allocation. We need trade and tax policy
to help this economy," Warsh commented. "Central banks have
policies to buy time in the short term for fiscal policies to work.
What the Fed did yesterday is try to buy time for the long
Watsh left the Board of Governors in 2011 after voicing
skepticism about QE1 and 2. He joined the Fed after serving as a
economic adviser to President Bush and, prior to his time at the
White House, Warsh worked at Morgan Stanley where he specialized in
mergers and acquisitions.
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