Asness, economists look to sink QE2

Send letter to Fed boss Ben Bernanke urging central back to halt latest round of quantative easing
NOV 16, 2010
By  Bloomberg
A group including former Republican government officials and economists urged Federal Reserve Chairman Ben S. Bernanke to halt his expansion of monetary stimulus, saying it risks an inflation surge. “The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment,” said the letter, signed by 23 people including Cliff Asness, who runs AQR Capital Management LLC, one of the world's biggest hedge funds; Stanford University Professor John Taylor, creator of a monetary-policy formula used by the Fed; and Douglas Holtz-Eakin, a former Congressional Budget Office director. The letter increases pressure on Bernanke, whose Nov. 3 decision to buy $600 billion of Treasuries in a bid to reduce unemployment has been criticized by Republican politicians and officials in Germany, China and Brazil. Bernanke was defended today by allies including Bank of Israel Governor Stanley Fischer and Princeton University Professor Alan Blinder. “We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy,” the letter said. The missive will be published in tomorrow's editions of the Wall Street Journal and New York Times, said Jennifer Pollom, a spokeswoman for Economics 21, a Washington research group whose logo is on the letterhead. Two signers, Kevin Hassett and Amity Shlaes, are columnists for Bloomberg News. The letter is an effort to “stop a bad idea,” Columbia University Professor Charles Calomiris, a signer of the letter, said today in a Bloomberg Television interview. Fischer, who advised Bernanke on his dissertation at the Massachusetts Institute of Technology in the 1970s, said today on Bloomberg Television's “Surveillance Midday with Tom Keene” that the Fed is taking “a standard monetary policy action.” Blinder, a former Fed vice chairman, said in a Wall Street Journal opinion article that Fed critics are “the economic equivalent of the Flat Earth Society.” David Blanchflower, an economics professor at Dartmouth College in Hanover, New Hampshire, and a former Bank of England policy maker, said the criticism “shows very little understanding of how monetary policy makers behave.” “The Fed is the only show in town,” Blanchflower, a Bloomberg News columnist, said on Bloomberg Television's “InBusiness with Margaret Brennan.” The letter is “dangerous politics, playing with an economy that is fragile,” he said.

Latest News

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity
Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity

Some investors recently have seen million dollar plus decisions by FINRA arbitration panels involving complex products decisions go their way.

What does it take to feel 'financially comfortable' or 'wealthy' in 2025?
What does it take to feel 'financially comfortable' or 'wealthy' in 2025?

New report shines a light on how Americans view wealth today.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.