PIMCO’s Mohamed El-Erian is on CNBC this morning, and immediately the discussion turns to QE and the Fed.
Even Bernanke admits, he says, that all efforts have benefits and risks, and right now, the big story of the year is that every policy effort so has fallen short of goals.
The transmission mechanism has broken.
The biggest glaring failure is stimulus, which was meant to bring unemployment down to 8%. Instead we have 10% unemployment.
But, at leas tthe stimulus helped avoid global depression.
As for current stimulus? If you’re going to do it, also do it by addressing structural problems: education, retraining, labour mobility.
Specifically with regards to QEII it’s all about what the Fed buys and doesn’t buy. Those assets the Fed doesn’t buy may not do so well. Suffice to say he’s sceptical of the David Tepper thesis, that investing stocks is a win-in.