Dallas Fed President Says QE “Massive Gift of Wealth”

In perhaps the strongest repudiation of the US Federal Reserve policy yet, a voting member of the central bank called quantitative easing “A massive gift intended to boost wealth.”

Gift of wealth comes amidst rising inequality

As rising income inequality plagues the US to historic levels, and political leaders look at the issue from a campaign standpoint, such critique of the Fed policy could receive widespread attention.  As reported in ValueWalk, a recent study from a global group of economists shows that the United States continues to be the leader in creating income inequality.

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Speaking to a London group, Richard Fisher, president of the Federal Reserve Bank of Dallas, noted the massive additions to the Fed balance sheet and advocated for a much faster elimination of the Fed’s policy towards quantitative easing, ideally ending in October.

Critical of the Fed’s policy of giving forward guidance

Fisher was also critical of the Fed’s policy of giving forward guidance, according to a report.  This is a response to Fed Chairwoman Janet Yellen’s first policy-setting meeting and later press conference, where she indicated the historic bond buying program might come to an end in the spring of 2015.

Discussing the recent adjustment to forward guidance at this week’s FOMC meeting, Fisher said the communication efforts were not clear and actually complicated guidance.  The nature of qualitative guidance is broad and sloppy when compared to quantitative guidance, he was reported as saying.

“Is ‘Forward Guidance’ a crotchet …. to which exaggerated importance is attributed?,” Fisher said in the brief prepared remarks. “Have we at the (Fed) just taken up another fad? Or is this a real, lasting practice?”

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com