Confused about what the US Federal Reserve hopes to achieve with QE3? Now
you can find out. Stand in for Chairman Ben Bernanke and play the new and exciting
game that can be found on the San Francisco Federal Reserve Bank's website "So
You Want to be in charge of monetary policy".
Try pegging interest rates at 0.0% to 0.25% for 4 years (which is effectively
what the Fed is in the process of doing). Tellingly, the game is only able
to graph inflation rates up to 15% but using this approach I promise the numbers
will be much higher.
My best score was a 36.87% annual inflation rate pegging the
Federal Funds Rate to 0.25% for 48 months. Conveniently for the Fed's model,
unemployment always fell to 1.5% in this high inflation world. In countless
attempts the Fed's model never produced a stagflationary environment of high
unemployment and high inflation. They seem unable to conceive of a world where
the inflation they seek to create doesn't improve employment rates (i.e. doesn't
stimulate the real economy). I think this may prove to be a bit of a blind-spot
in central bank thinking.
Stephen graduated from London Business School and is the founder of one of
Canada's largest farmland investment funds, Agcapita, and Petrocapita Income
Trust an energy investment fund. Petrocapita and Agcapita are built around
the core premise that the world is in a bull market in commodities driven by
inflation and a step-change increase in demand and, accordingly, that investments
with direct or indirect exposure to commodities in a politically stable environment
such as Canada will provide above average returns. Agcapita holds a diversified
portfolio of farmland and Petrocapita holds a diversified portfolio of low
risk, producing energy assets.
Stephen has over 15 years experience as a fund manger - working for organizations
such as the European Bank for Reconstruction and Development, Societe Generale
and Baring Brothers. Stephen has appeared on Business News Network and CBC
News and been quoted in such media outlets as Fortune, the Financial Times
and The Globe and Mail.
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