The Federal Reserve's decision last month to step up its buying of Treasury securities could be laying the groundwork for inflation and a host of other political and economic troubles, former Fed governor Frederic Mishkin told CNBC.
In a rare public dissent with the central bank, Mishkin, a professor at Columbia Business School who left the central bank in 2008, called the Fed's move to use receipts from maturing mortgage-backed securities to buy more Treasurys "one of the most important decisions the Fed has made in a very long time."
The purchases of long-term government debt—expected to total about half a trillion dollars—should be accompanied by an exit strategy, he said.
"When you hold a lot of long-term debt on your balance sheet, you're now exposed to a lot of interest rate risks," Mishkin said in a live interview. "All of a sudden you could be booking losses. Think about the screams in Congress about all of this."
The Fed decision at its Open Market Committee meeting stunned the financial markets, but at the time investor reaction was interpreted as worry over the central bank not doing enough.
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Comment: It is all in vain. The sheeples won't listen to me or to you or, for that matter to Mishkin or to anybody else. All the financial sheeples want is low interest rates. As long as they get these, they'll keep quiet. But be forewarned: hell will break loose when rates begin to rise. Then the sheeples will turn into "wolfeles" in one moment to the next.
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