Gundlach, Grantham Rip Fed's Easing Program

Sunday, 23 Feb 2014 06:10 PM

By Dan Weil

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Some heavyweights on Wall Street strongly criticize the Federal Reserve's highly accommodative monetary policy, saying it has artificially inflated asset markets without boosting the economy much.

Bond market star Jeffrey Gundlach, CEO of DoubleLine Capital, and Jeremy Grantham, chief investment strategist of money manager GMO, are two of the critics.

"I don’t really like the Fed very much," Gundlach told The New York Times. "I wish the Fed were not manipulating the market the way it is.”

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Some experts are worried about possible bubbles, especially in the stock market. "My guess is that the Fed will play its usual game till we’re in good old-fashioned bubble territory," Grantham told The Times.

"Either she [Fed Chair Janet Yellen] is ignorant about the markets, or she is cynical, and she is manipulating the market."

Grantham says the economy might have rebounded from the recession much more strongly without so much intervention by the Fed.

It "would have broken the back of moral hazard, just as Volcker did when he broke inflation," he said, referring to Fed Chairman Paul Volcker's tight policy of the early 1980s.

Meanwhile, officials in emerging markets, such as India and South Africa, have complained that the Fed isn't adequately coordinating its policy globally.

But Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and a former Fed economist, defends the central bank. The Fed’s "job is not to make policy for India, it’s to make policy for the U.S.," he told Bloomberg.

"Blaming other people for their problems isn’t very helpful."

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