David Einhorn, the genius hedge fund manager of Greenlight Capital, was on Charlie Rose last night talking about the effects of the Fed’s second round of Quantitative Easing on the average American.In case you’ve been MIA the past month, the Federal Reserve decided to buy another $600 billion in Treasuries (and might buy more) on November 3rd.
Technically, they did it “to lower borrowing costs and stimulate the economy,” says Einhorn, but QE2 will instead probably result in rising prices of basic goods for consumers and businesses, which will curtail economic growth.
Basically, the Fed just threw away $600 + billion because QE2 “will be counterproductive,” he told Rose, according to Bloomberg.
“The goal of quantitative easing right now is to raise the inflation rate. If you do raise the price of clothing, it effectively lowers everybody’s standard of living and gives them less money to buy other things.”
So better get ready – the price is about to go up on everything you buy, for no reason. And while you’re paying more, you can rest easy knowing it’s doing nothing to help stimulate the economy.
To hedge against inflation like Einhorn, buy gold, the “one kind of money Bernanke can’t print more of,” according to Einhorn. The hedge fund manager believes gold will keep going up as long as monetary and fiscal policy is so bad. Gold-denominated investments are currently his fund’s biggest position.
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