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     Apr 15, '14

Financial stability
Commentary and weekly watch by Doug Noland

"Each Spring, thousands of government officials, journalists, civil society organizations, and invited participants from the academia and private sectors, gather in Washington, DC, for the Spring Meetings of the IMF and the World Bank Group. At the heart of

the gathering are meetings of the IMF's International Monetary and Financial Committee and the joint World Bank-IMF Development Committee..."

Wednesday's opening of the International Monetary Fund seminar was titled "Managing the Transition to Normality - Implications for Fiscal Policy". From panel moderator Rob Cox (Reuters): "Or, as one of my colleagues said, 'Isn't this the panel where you ask the question whether the world is ready for a withdrawal of the punchbowl.'"

To commence the discussion, the audience was asked to vote "yes" or "no" to the question: "Is the time right for central banks to unwind unconventional monetary policies?" Not surprisingly, the vote went overwhelmingly in favor (63 to 37) of keeping the drinks flowing. There are reasons why monetary policy has throughout history been most effectively managed by disciplined and independent central bankers.

Federal Reserve Bank of Chicago president Charlie Evans represented the Federal Reserve. This panel discussion set off what became during IMF and related events an indictment of US monetary policy. In a particularly interesting exchange, Citigroup's chief economist, Willem Buiter, took strong exception with Fed policy. Buiter is no hawk. In other comments, he blasted the European Central Bank for running tight monetary policy. Buiter is, however, emblematic of an increasingly vocal camp that sees the Federal Reserve's quantitative easing (QE) as high-risk, minimal reward policy.

Evans was notably defensive. In my view, he is the last Fed official who should be representing US policy at this juncture. Evans only fuels what is a mounting global lack of confidence in the Federal Reserve.

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Doug Noland is a market strategist for the Prudent Bear Funds.

(Republished with permission from PrudentBear.com. Copyright 2005-2014 David W Tice & Associates. All rights reserved.)




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