cawacko
Well-known member
Now Bob Rubin is not the end all be all of Fed policy but I do think he echoes some points others have made in the bolded text.
Rubin Says Fed’s QE3 Will Lead to Trouble
Former Treasury Secretary Robert Rubin isn’t optimistic about U.S. growth prospects this year — but he doesn’t think there is much the Federal Reserve can or should do about it.
In fact, Mr. Rubin took the central bank to task for its bond-buying program, also known as quantitative easing or QE3, Friday in his keynote address to the University of Chicago Booth School of Business forum on monetary policy.
“The real issue is, what were the risks and rewards of QE3? There’s a widely held view that the benefits of QE3 have been relatively limited,” Mr. Rubin told an audience that included several Fed officials. At the same time, “these vast flows of capital have gone up the risk curve and created what may well have been excesses, that now as we know are tending to unravel — and that has a destabilizing effect.”
Mr. Rubin also said he is not as confident as top Fed officials who say they can absorb the high level of reserves in the banking system when the time comes to tighten monetary policy by simply raising the rate the central bank pays for holding excess reserves.
“I don’t think there are any magic wands,” Mr. Rubin said. “Uncertainties could be far greater with the vast increases that have taken place in the balance sheet of the Fed,” which is now worth more than $4 trillion, up from pre-crisis levels around $800-900 billion.
During the Clinton administration, Mr. Rubin was one of the architects of financial deregulation before he returned to work on Wall Street. Before joining the government he spent several decades at Goldman Sachs & Co, rising to become co-chairman. After leaving the administration he joined Citigroup Inc., serving as a director and senior adviser in the years leading up to and through the financial crisis.
Julia Coronado, an economist at BNP Paribas, took issue with Mr. Rubin’s focus, pointing out that inflation remains low despite aggressive central bank actions. “How come we’re not more worried about that?” she asked.
“I’m not sure there’s much you can do about low inflation right now,” Mr. Rubin said.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy and a WSJ contributor, then asked Mr. Rubin what the Fed should do about monetary policy at the current juncture.
Mr. Rubin’s answer elicited laughter from the room of Wall Street and hedge fund economists: “I think I would do what the Fed seems to be doing, but I don’t know what the Fed is doing. I hope they know what they’re doing.”
http://blogs.wsj.com/economics/2014/03/03/rubin-says-feds-qe3-will-lead-to-trouble/
Rubin Says Fed’s QE3 Will Lead to Trouble
Former Treasury Secretary Robert Rubin isn’t optimistic about U.S. growth prospects this year — but he doesn’t think there is much the Federal Reserve can or should do about it.
In fact, Mr. Rubin took the central bank to task for its bond-buying program, also known as quantitative easing or QE3, Friday in his keynote address to the University of Chicago Booth School of Business forum on monetary policy.
“The real issue is, what were the risks and rewards of QE3? There’s a widely held view that the benefits of QE3 have been relatively limited,” Mr. Rubin told an audience that included several Fed officials. At the same time, “these vast flows of capital have gone up the risk curve and created what may well have been excesses, that now as we know are tending to unravel — and that has a destabilizing effect.”
Mr. Rubin also said he is not as confident as top Fed officials who say they can absorb the high level of reserves in the banking system when the time comes to tighten monetary policy by simply raising the rate the central bank pays for holding excess reserves.
“I don’t think there are any magic wands,” Mr. Rubin said. “Uncertainties could be far greater with the vast increases that have taken place in the balance sheet of the Fed,” which is now worth more than $4 trillion, up from pre-crisis levels around $800-900 billion.
During the Clinton administration, Mr. Rubin was one of the architects of financial deregulation before he returned to work on Wall Street. Before joining the government he spent several decades at Goldman Sachs & Co, rising to become co-chairman. After leaving the administration he joined Citigroup Inc., serving as a director and senior adviser in the years leading up to and through the financial crisis.
Julia Coronado, an economist at BNP Paribas, took issue with Mr. Rubin’s focus, pointing out that inflation remains low despite aggressive central bank actions. “How come we’re not more worried about that?” she asked.
“I’m not sure there’s much you can do about low inflation right now,” Mr. Rubin said.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy and a WSJ contributor, then asked Mr. Rubin what the Fed should do about monetary policy at the current juncture.
Mr. Rubin’s answer elicited laughter from the room of Wall Street and hedge fund economists: “I think I would do what the Fed seems to be doing, but I don’t know what the Fed is doing. I hope they know what they’re doing.”
http://blogs.wsj.com/economics/2014/03/03/rubin-says-feds-qe3-will-lead-to-trouble/