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Wednesday
Oct062010

Stiglitz: The FED's Flood Of Liquidity Is Throwing The World Into Currency Chaos (Ambrose Says $30 Trillion QE2)

It's worth noting that Stiglitz is a Keynesian, and most Keynesians love Bernanke's plan for QE v. 2.0.  So this is surprising commentary and puts him at odds with Krugman's calls for trillions in new Fed asset purchases.

From last week, did you see the following story from Ambrose Evans-Pritchard quoting a source who claims that $30 trillion of QE stimulus is needed.

Currency traders would flee the U.S. dollar and gold would super-spike.  Even Bernanke is not that desperate, yet.

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Oct. 5 (Bloomberg) -- Joseph Stiglitz, Nobel Prize-winning economist, comments on the effectiveness of U.S. monetary policy, and its impact on global growth. He made the comments in a roundtable discussion at Columbia University in New York.

On the effectiveness of quantitative easing:

“There is lots of instability caused in part by the flood of liquidity from the Fed and the ECB. The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world.”

“In the U.S., and in some other countries, will the policy of quantitative easing suffice to solve the problems of inadequate global aggregate demand? The answer clearly is not. Lowering the interest rates may help a little bit, but it’s much too weak to address the problems facing the U.S. and Europe. So the answer is, and that is the point Soros made as well, we need fiscal stimulus.”

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(Reuters) - Ultra-loose monetary policies by the Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday.

A "flood of liquidity" from the Fed and the ECB is bringing instability to foreign-exchange markets, forcing countries such as Japan and Brazil to defend its exporters, Stiglitz told reporters in a conference at Columbia University.

"The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy," Stiglitz said. "It's doing nothing for the American economy, but it's causing chaos over the rest of the world. It's a very strange policy that they are pursuing."

The U.S. dollar has weakened about 6.5 percent against a basket of major currencies since the beginning of September as prospects for further monetary easing by the Fed have led investors to seek higher returns elsewhere.

That flow of dollars caused currencies to appreciate in many emerging market countries such as Brazil, which offers strong growth prospects. The Japanese yen has also hit record highs against the dollar on expectation of additional greenback weakness.

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Reader Comments (11)

See Saw Buffett Strikes Again...make up your mind you rich old coot...

In future, chief executives of banks who need government assistance should "go broke", said Mr Buffett. Their wives "should go broke, too", he added.

The prospect of another round of bank bonuses is likely to inflame public opinion in the US, where the broader economic recovery is flagging.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8044789/Warren-Buffett-says-in-future-Wall-Street-chiefs-should-go-broke-and-their-wives.html
Oct 6, 2010 at 1:28 AM | Unregistered CommenterZ
no shit...why next time uncle warren...why not last time...it's not too late to bankrupt them...i would love to see mrs. blankfein fending for herslef among the masses...

GOLDMAN SACHS WIVES HATE TO WAIT

http://www.nypost.com/p/pagesix/item_VddIjS4IenJXTwP5ihUg1M
Oct 6, 2010 at 1:55 AM | Registered CommenterDailyBail
Banker's Foreclosure Fraud Threatens a New Financial Meltdown

http://www.thepennsylvaniaprogressive.com/diary/2794/bankers-foreclosure-fraud-threatens-a-new-financial-meltdown?source=patrick.net

This is going to be a huge story...
Oct 6, 2010 at 2:07 AM | Registered CommenterDailyBail
JPMorgan, Bank of America Face `Hydra' of State Foreclosure Investigations

http://www.bloomberg.com/news/2010-10-06/jpmorgan-bank-of-america-face-hydra-of-state-foreclosure-investigations.html

Getting uglier by the day...mentions $25k penalty PER foreclosure by robo-signer...we are talking billions before this is over...the state AGs are eating this up...
Oct 6, 2010 at 2:09 AM | Registered CommenterDailyBail
So, Paulson lied? He’s misled America from Day One

http://michellemalkin.com/2009/10/05/so-paulson-lied-hes-misled-america-from-day-one/

An awesome recount of Paulson's lies...
Oct 6, 2010 at 2:12 AM | Registered CommenterDailyBail
(" Banker's Foreclosure Fraud Threatens a New Financial Meltdown ")

Would this be considered (Fraud Upon the Court) and would those involved be charged with criminal activity?
Oct 6, 2010 at 1:32 PM | Unregistered CommenterSagebrush
A scientist is experimenting with a toad. He say's "Jump toad, jump" and the toad jumps. He notes in his journal, "Toad responds to vocal encouragement". He then amputates the toads legs and says, "Jump toad, jump!" Nothing happens. He notes in his journal, "Amputation of legs causes deafness in toad."

A central banker witnesses the growth of a great industrial powerhouse, producing its way into prosperity through the growth of jobs and products and services for all the world. The country, prosperous beyond its wildest dreams, consumes and consumes and consumes. He notes in his journal, "Consumption creates prosperity".

You would think that policy makers would understand the difference between corelation and causality. Keynes and his followers obviously didn't.
http://letthemfail.us/archives/5864
Oct 6, 2010 at 1:33 PM | Unregistered CommenterWil Martindale
wil...i put your article on my list for reading later tonight...
Oct 6, 2010 at 9:42 PM | Registered CommenterDailyBail
And welcome to patrick.net readers who have been linked to this story tonight...
Oct 7, 2010 at 12:30 AM | Registered CommenterDailyBail
Would this be considered (Fraud Upon the Court) and would those involved be charged with criminal activity?

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It looks that way sagebrush...i will have more links on the growing story coming up soon...
Oct 7, 2010 at 12:58 AM | Registered CommenterDailyBail

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