The Federal Reserve's quantitative easing (QE) program is damaging for the economy, says Campbell Harvey, an international business professor at Duke University's business school.

"I don't agree that there should be a QE whatsoever," Harvey told Newsmax TV's "America's Forum." "It is massively distorting for the U.S. and the world economy to have real interest rates that are negative."

The low rates created by QE have pushed the dollar down, distorting trade flows and misallocating resources, Harvey says. "We've seen a surge in [U.S.] exports," he notes. "The reason for the surge is that the U.S. dollar is artificially cheap."


Watch our exclusive video. Story continues below.



That works out fine for the short term, Harvey says. But, "in the long term, we will pay the price, because we're seeing right now growth rates in emerging markets slowing down," he said. "That will come back and bite the U.S."

Editor’s Note: Billionaires Dump Stocks (See Video)

The Fed doesn't need to have a $3 trillion balance sheet, Harvey says. "That is going to create problems in the future. So taper, actually, for me, I would prefer that they just end it and start to get their balance sheet in order. If we leave it, the longer it goes, the worse it's going to get."

Much attention is riveted on the size of Fed tapering. But, "what we should be focusing on" given the explosion of the Fed's balance sheet and the continuation of negative real interest rates is "what about the cost?" Harvey said. "The cost is going to come, and it's just a matter of time that we have to pay."

When banks start to repatriate the more than $2 trillion that they have sitting at the Fed, that may lead to a burst of inflation, Harvey said. "That is the main challenge."

New Fed Chairman Janet Yellen has extremely little room to maneuver policy, Harvey says.

"Given that we've had a long tenure of [prior Chairman Ben] Bernanke, her calculus right now is to continue on the path that is set out, have a minimal amount of surprise [and] hope that the U.S. economy continues to grow at 3 percent or 3 percent-plus," he said.

Growth is the only escape from such a huge balance sheet, Harvey says. "So if there's enough growth, that balance sheet can be gradually reduced without having an inflationary impact," he said.

"If that growth slows and that money is repatriated, it is like a helicopter drop of cash on the economy, and there could be explosive inflation."

Meanwhile, if you assume gold should have a constant inflation-adjusted value over time, it should fall to $800 an ounce Harvey says.

In addition, gold may suffer from a resumption of the rise in U.S. long-term interest rates, he says. April gold futures stood at $1,257.90 on the Comex early Wednesday afternoon.

"You want to sell it before it goes to $800," Harvey said.

Editor’s Note: Billionaires Dump Stocks (See Video)

Related Stories:

• El-Erian: Underachieving Congress May Gum Up Economy's Resurgence
• Harvard's Martin Feldstein: It's Still Morning in America