Thursday, 03 Oct 2013 08:16 AM
By Dan Weil
The Federal Reserve should drop its quantitative easing (QE) and just focus on controlling inflation, says James Rickards, a partner at Tangent Capital Partners.
“My own view, which has no chance of happening, is that they should stop asset purchases completely and start to sell assets and raise interest rates,” he told Hard Assets Investor.
The Fed should simply declare, “We don’t do stimulus. We’re a central bank. Our job is to maintain price stability. We’re not in the business of boosting the economy or propping up the stock market or propping up the housing market.”
Rickards understands the Fed’s rationale. “But it has gone way outside the mandate,” he explained.
QE will go down as “one of the greatest economic blunders in history.”
Gold may slip a bit in the short term because of “Fed blunders,” he noted. But “over three or four years, we’re looking at a much more serious risk of financial panic and collapse and a rise in gold to significantly higher levels.”
The precious metal could reach $5,000 to $7,000 an ounce, Rickards predicted.
As for the Fed, star bond fund manager Jeffrey Gundlach, CEO of DoubleLine Capital, told Bloomberg the central bank won’t reduce its QE before a new chairman takes over Feb. 1.
Addressing the possibility of a tapering at the Fed’s policy meeting Oct. 29 and 30, Gundlach said, “It’s hard to believe the data will have such a monumental change in the next couple of weeks.”