Europeans are not buying the Fed’s investment plan

Marketplace Staff Nov 19, 2010
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Europeans are not buying the Fed’s investment plan

Marketplace Staff Nov 19, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: Now to the Fed’s efforts to boost lending here in the U.S. And Chairman Ben Bernanke’s attempts to convince the world that pumping an additional $600 billion into the economy was the right thing to do.

Let’s bring in David Kelly, chief market strategist at JPMorgan Funds. He joins us now live. Good morning.

DAVID KELLY: Good morning.

HOBSON: So let’s listen to some of what Chairman Bernanke had to say in Frankfurt this morning.

BEN BERNANKE: Insufficiently supportive policies in advanced economies could undermine the recovery, not only in those economies but for the world as a whole.

HOBSON: For the world as a whole. David Kelly, do you think the Europeans are buying it?

KELLY: No really. I mean I think the Europeans would like to see a stronger U.S. economy. But not one that is stronger because of us getting more trade. Everybody’s trying to get a low currency, everybody wants to increase their exports, and the Fed’s policy of very expansionary monetary policy is pushing down the dollar. It’s helping our exports, but it’s hurting Europe’s exports.

HOBSON: Do you think the Fed’s policy is working the way Chairman Bernanke wants it to?

KELLY: No I don’t think so. A lot of people worry about the inflationary affects of quantitative easing. But my real problem is that in order to sell this policy, he’s really having to undermine confidence. And if you look at what he said in his speeches this morning, in Europe, they really talk about the weakness of the economy, the potential for a relapse, and the problem is that the American economy is not suffering from a lack of equity, it’s suffering from a lack of confidence. It’s kind of like if you’ve got a car, and the spark plugs are shot, and you keep on flooding the engine with gasoline, and so I think the real problem is that of confidence, and the more the federal reserve tries to help the economy, the more it’s actually undermining confidence.

HOBSON: David Kelly, Chief Market Strategist at JPMorgan Funds, thanks very much.

KELLY: You’re very welcome.

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