David Rosenberg: Sell The News, QE Will Do More Harm Than Good For The American Consumer

David Rosenberg

David Rosenberg of Gluskin-Sheff was just on CNBC urging people to sell the news regarding quantitative easing.

Along the lines of what we’ve been saying, there’s a lot of enthusiasm for it (it seems), but in the end, he argues it won’t accomplish much.

Here’s what he wrote in his note:

This is a market completely based on hope. Throw fundamental investment principles out the window. It’s now all about how the Fed can manage to inflate asset prices now that fiscal policy has tested its limits with the voting public. But where does this renewed faith in the Fed come from? Is this not the same Fed that took the funds rate from 5.5% to near- zero? The same Fed that tripled the size of its balance sheet in QE1? The same Fed that thought the housing and mortgage crisis would stay “contained” back in 2007? The same Fed that confused a credit contraction with a liquidity squeeze? The same Fed that believed, in the summer of 2007 when the crisis first broke that we would see 2.5- 3.0% real GDP growth in 2008?

The same Fed that was contemplating its exit strategy just a short six-months ago and believed it could start to shrink its balance sheet last spring? The same Fed that investors have so much faith in, and is the same Fed that passively tightened policy with a 25 basis point hike in the discount rate to 0.75% back on February 19th. The same Fed that just trimmed its forecast three times in the past four months, and is this not the same Fed that investors now have “faith” in? The question is, the “faith” to do what?

In his note he presents a series of charts on the dollar and various commodities showing what QE is doing to the price of goods and American buying power.

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