The latest round of extraordinary Federal
Reserve stimulus is risky and leaves little room to maneuver should
another crisis hit, economist Lawrence Lindsey told CNBC’s “Squawk Box” on Wednesday.
Lindsey
said that with the Fed purchasing at least $40 billion a month in
mortgage debt through QE3, “they are buying the entire deficit.”
“I
have no problem doing extraordinary things in extraordinary times,”
said Lindsey, a former White House economic advisor under former
president George W. Bush who now runs his own consulting firm.
Lindsay said he agreed with the Fed’s first two rounds of quantitative easing.
Now, with the economy now growing closer to its trend rate, “doing
something that’s really out of the ordinary is risking things.”
He added, “If this becomes the new ordinary, it’s hard to imagine the Fed’s maneuvering room” should another crisis hit.
The central bank's
recently announced bid to stimulate the economy has also taken the
pressure off politicians to deal with the U.S. fiscal cliff, Lindsay
argued, which could result in destabilizing tax hikes and spending cuts
automatically taking effect early next year.
“The
Fed, maybe because it can't do otherwise, has told the Congress: 'We're
going to buy your bonds no matter what,'” Lindsey said. “I think that's
keeping the pressure off the president, off the Congress.”
Read more: http://www.cnbc.com/id/49180320
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