Federal Reserve Chairman Ben Bernanke announced earlier this week that the central bank would be tapering in 2014 its bond-buying program from $85 billion to $75 billion per month. And the stock market soared to record highs in response, a reaction that surprised critics who say Wall Street is hooked on federal stimulus.
Jim Rickards said the announcement didn’t reflect plans for a pure tapering because the Fed would keep interest rates low for a long time, sending the stock market the message it can borrow money for a long time to come.
An investment banker, Rickards said in an interview with Yahoo Finance’s Lauren Lyster that the Fed’s Quantitative Easing doesn’t work and that this tapering is the bank’s attempt to try something else after pumping $4 trillion into the economy hasn’t yielded the inflation it’s after. The Fed’s stated inflation target is 2 percent. “This whole thing is one big experiment and has been since 2008,” he told Lyster. “Don’t assume the Fed knows what they’re doing. They’re clearly improvising,” he said, citing the bank’s 13 changes in guidance, which includes QE and other measures, over the past five years.
Rickards said he expects a recession next year despite some improved economic indicators. Fifty million Americans on food stamps, 11 million on disability and low-level jobs buoying employment numbers worry him.