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Former Federal Reserve Board Governor Mark Olson on Federal Reserve action to boost the economy and the risks of inflation.
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Mark Olson is strong client risk advisors co chair and former Federal Reserve board governor you heard what he said it was a very very long -- important interview I thought where he clearly.
Truly feels that QE3 and QE are working in will -- -- you fix what why I think I think Hank.
Actually nailed it it in his previous comment but -- what when he said he you've got an at -- an element of certainty.
A monetary policy where there's no certainty and fiscal policy.
Also I think what you've done -- you've taken off the table.
Oh what monetary policy will be for the next several months because there's going to be a forty billion dollar.
Each month -- purchase of mortgage backs.
But so I think what you've done -- provided an element of certainty now there there are two issues their number one was there -- psychological boost to it -- very clear.
What is what -- yet it did to determine is the extent to -- it'll drive down a long term rates.
However I think I think what's very important is -- when we first consider this issue with a one that I didn't think you have.
You would set up by saying what are we gonna have to have a half trillion of investment in order to achieve that and if we don't yet there.
-- -- -- -- -- But if you but -- -- instead define it by saying we're gonna do it in forty billion dollar instruments per month you've taken the gross number off the table.
I think it was a very wise approach well.
There's that there is a huge question an overhang question of what you do with the portfolio we have a portfolio now the Federal Reserve does.
Of close to three trillion dollars when this is all over it might be up to four trillion dollars and up Peter our own Peter Barnes.
Asked mr.
Rosen -- exactly how you unwind.
This huge portfolio.
And -- here's his response take a listen.
I do think we have the tools to exit when an exit becomes appropriate.
Mean the gold this isn't raised in terms of amounts that were buying more and -- it's phrased in terms of getting economic outcomes.
That is the purpose of doing this is getting a better macro economic outcome and I think that's what we should be broke the story it.
Now market that was a response it was not an answer look at how do you answer the question of how you exit this huge portfolio -- answer was the only answer.
Them that the risk is that it's going to be a very that it wasn't any answer our response he did not answer the question it was the only response that -- you have your counting on.
The fact of a resilient economy.
Being resilient to the point that you can allow the runoff most of which will not happen the next.
Several months but but I think of them that all of us that are as though they're not part of the voting are now recognizing that's one of the real risk of that there are two real risks that's one of them what will -- what will be the effect when you ultimately start tightening.
And the second risk is that with the expansion of the money supply like -- -- running the risk of inflation.
That's what I wanted to ask you about it if you look at say for example there was an auction of ten year tips treasury inflation protected.
The securities.
-- today and it it was -- -- anemic it wasn't what people or Russian bear so my question to you is are we creating any kind of bubble that you can foresee.
If not -- -- Is a potential.
I think -- but I think the important thing is why and one other thing that that what one of the things that the Fed is very very good debt.
Is is is is being able to to document and to be able to monitor for inflationary pressure.
Core inflationary pressure is one of the things that the Fed does well and that's the most important component of monetary policy evening minus food and energy the that exactly exactly taken those two -- the tables are you looking at core the there's the element of inflation they'll reject whether or not they're gonna be inflation if you try to -- -- there is a huge bubble in treasuries right now if it pops.
How will that -- how will the government ever be able to sell its debt.
Well whether -- at the moment -- -- unless you're going to be some very fundamental changes we've we've got a ready market out there because the demand for dollar.
The dollar -- and dollar denominated instruments around the world remains very China's still buying including China and could China being the dominant one.
Mark -- good to see more thank you very much for coming in both -- -- the -- I enjoyed being here do we make our viewers smarter we appreciate.
