The Federal Reserve is unwilling to tighten a monetary policy that is too accommodative, says star hedge fund manager David Einhorn.
As a result, the president of Greenlight Capital says he is sticking with his investment in gold.
“Fed Chairman Ben Bernanke is presently force-feeding us what seems like the 36th Jelly Donut of easy money and wondering why it isn't giving us energy or making us feel better,” Einhorn writes on The Huffington Post.
“Instead of a robust recovery, the economy continues to be sluggish.” Economic growth slowed to 2.2 percent in the first quarter
Interest rates near zero destroy the income of savers and boost inflation, Einhorn says.
“Tighter monetary policy would limit inflation and in all likelihood trigger a pronounced reduction in oil and food prices, which would provide a substantial boost to the real economy.”
If the Fed was willing to raise rates, Einhorn says he would sell gold and bonds and buy stocks. But given that the Fed won’t tighten, “I will keep a substantial long exposure to gold,” he says.
“One nice thing about gold is that it doesn't even have quarterly conference calls.”
Some Fed policymakers are coming around to Einhorn’s view.
San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart, and Philadelphia Fed President Charles Plosser, in a joint appearance Thursday, spoke with unusual unanimity in opposing further easing unless the economy falters, Reuters reports.
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