The huge easing programs being carried out by central banks around the world will end in no good, says Scott Minerd, chief investment officer at Guggenheim Partners.
"New monetary orthodoxy is likely to permanently impair living standards for generations to come, while creating a false perception of reviving prosperity," he writes in an article for the
Financial Times.
"The prospect of improvement in economic growth is largely a monetary illusion."
The European Central Bank and Bank of Japan are engaged in massive quantitative easing, and the Federal Reserve's balance sheet stands at a whopping $4.5 trillion.
The near-zero interest rates created by central banks are penalizing many savers, Minerd notes. "The depressed returns available on fixed-income securities, largely as a result of QE, are acting as a tax on investors, including individual savers, pension funds and insurance companies," he says.
The Fed has kept its federal funds target rate at a record low of zero to 0.25 percent since December 2008. As a result, some money-market funds yield only 0.01 percent.
Meanwhile,
Wall Street Journal columnist Alen Mattich says that the combination of falling inflation and rising asset prices in the United States and elsewhere is creating a conundrum for central bankers.
U.S. consumer prices were unchanged in the 12 months through February, and the S&P 500 index stands less than 2 percent from its record highs.
"The balancing act required to manage the tricky scenario of falling inflation and rocketing asset prices has many a policymaker sounding nervous, and with good cause," Mattich writes.
For example, St. Louis Federal Reserve President James Bullard tells the
Times that the Fed risks igniting asset bubbles with "devastating consequences" if it doesn't raise interest rates soon.
But for the most part, it's "clear that central bankers will mostly play down bubble risks (they’ve seldom identified bubbles except with hindsight and not always then either) and keep their focus on the main real economy metrics: inflation and unemployment," Mattich says.
"Whether the outcome will be better than it was the last time round is another matter."