Thursday, February 27, 2014

Man who managed QE for the US FED sees "real dangers to the US currency as a reserve currency"

This is a significant post related to possible coming major monetary system change.  Andrew Huszar  is the man who apologized for managing the initial QE program for the US FED. In this recent interview with King World News he says QE is failing, he fears a possible 30% drop in the stock market,  and he owns gold because he sees "real dangers to the US currency as a reserve currency". (King World News is an alternative news site that does interviews with a number of respected mainstream sources such as Art Cashin (CNBC), Paul Craig Roberts, Rick Santelli (CNBC) and former OMB Director David Stockman as a few examples)

So we can now add another significant key US insider to the list of those who see a future where the US dollar may not be able to maintain its position as world reserve currency. This interview is interesting for many reasons. One of which is that someone who recently worked for the FED now owns gold and will discuss publicly why he does. First, here are the links to the interview (which is in two parts at King World News). 

Huszar fears stocks may drop 30%

Huszar owns gold 

Here a few segments from this compelling interview:

Eric King:  “Andrew, what made you come out publicly and say that QE was a failure and apologize to everybody?  What made you come out and do that?”

Huszar:  “I left the Fed in 2011. ... I maintain great respect for a lot of the people inside (the Fed), and so I struggled for a long time to come out and speak publicly about it.  But in the end I spoke out because I believe that QE, while initially well-intentioned, has really allowed the US to kick the can down the road with respect to major structural reform that has to do with its economy."

Eric King:  “Let’s come back to the fact that the Fed has this large trading room.  We basically have academics, and I’m summarizing, but we have academics now running the largest hedge fund in the world, and to me that sounds like a recipe for disaster.”

Huszard:  “Yes.  It’s one of the big unintended consequences of QE ... You have the Fed now driving markets.  You have the Fed now buying 90% of the new issuances in the mortgage market.  So there is a real question as to what happens when the Fed steps away.

Eric King:  “Andrew, both of us have a position in gold.  I’m just curious why you have a position in gold.  Why the investment in gold?

Huszar:  “I look at what the Fed has done basically since the beginning of the millennium, and I see a central bank that’s effectively been pumping cash into the market in different ways.  I think on some level that initially helped feed the run-up in gold." 

"But today why I am in gold is as a hedge against what I believe is going to be significant volatility down the line.  I think over the long term gold is going to be a very valuable thing to hold as part of a portfolio. ... We could see some significant shifts in the way money flows in the U.S. and some real dangers to the US currency as a reserve currency.  Obviously gold is a wonderful hedge for that possibility.”

"Ironically, one of the big risks of quantitative easing is that it was supposed to stimulate credit, and it really hasn’t.  The irony is:  If and when it actually succeeds and banks actually start lending again in large sums, that could take some time because the underlying credit picture is not fantastic in the US economy to this day, but to the extent that those reserves are out there long term, we do have this reality that the Fed could actually cause too much of a good thing. 

And banks suddenly deploying all those reserves out into the economy, and the Fed doesn’t necessarily have the tools to pull back on all of those reserves, and so there is this risk of heightened inflation going forward.  Whether it’s runaway or whether it creeps up, again, I think that’s a real question, but I think if you look at the picture right now with the U.S. economy with the money supply where it is, you cannot argue that there aren’t pretty substantial risks of inflation.”

My added comments: Here we have yet another key US insider saying what Jim Rickards, Paul Craig Roberts, David Stockman, and several other highly credible insiders are saying about the US dollar. This is why people need to take this topic seriously, stay informed, and keep a watchful eye on things.

Tomorrow we will have a post on some people who endorse gold that may surprise you. While US media sources mostly dismiss gold and do not take a sharp dollar drop seriously, some people who are promoting gold (key US insiders) may surprise you. We'll look at it tomorrow.

Udate: Here is the Surprising Insider Goldbugs article.

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