“The Federal Reserve’s massive easing program is going to end in financial disaster, says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission.
The Fed has become “an enabler of presidential and congressional inaction [on entitlements, etc.] by keeping interest rates artificially low for five years and now by printing money to buy U.S. bonds and mortgage backed securities at a $1 trillion annual pace,” he writes on his blog.
“Record low interest rates are propping up weak consumer demand but sowing the seeds of another financial crisis.”
Urban real estate is rising to unsustainable levels, as are junk bonds, Morici says. The Fed’s low interest rates have helped push student debt over $1 trillion, with one in six loans in default. The easing also has allowed many states to avoid pension reform, he adds.
“Inevitably, all that money will push up inflation, and then the Fed will be compelled to stop buying bonds and let interest rates rise to levels the federal and state governments can’t bear easily,” Morici writes.
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