Are Feds Pushing Inflation?

September 22, 2012
By

Mohamed El-Erian

Bad news for the middle class, seniors and many foreign lenders if this is true. Pimco’s El-Erian believes that the Feds want inflation now and will clean up the mess left behind later. He told CNBC the reason is that “the risks outweigh the rewards as the central bank tries to stimulate an economy that still is foundering three years after the financial crisis recession ostensibly ended.”

via CNBC

…As the network notes, El-Erian has previously called the policy a “reverse Volcker moment,” in reference to former Fed Chairman Paul Volcker, who raised rates and deliberately put the nation into recession in the early 1980s to control runaway inflation.

“Not only will they tolerate higher inflation, not only will they wish for higher inflation, but they actually may target higher inflation,” El-Erian said during a “Squawk Box” interview.

The interview is a response to last week’s announcement that the Fed was embarking on a third round of quantitative easing that will continue until the economy reaches an unspecified target in the jobless rate. The announcement provoked a firestorm of response in many financial services circles.

Bill Gross, El-Erian’s boss at PIMCO, joined his colleague by posting a critical tweet Monday night.

“Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple,” Gross tweeted…

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