Greenlight Capital’s David Einhorn, one of the most closely followed managers in the $2.2 trillion hedge fund industry, is out with his latest investment letter and provides another lambasting of the U.S. Federal Reserve for what he describes as short-sighted policy decisions with regards to its continued quantitative easing.
“We maintain that excessively easy monetary policy is actually thwarting the recovery,” Einhorn said of the Fed and its decision to continue buying $85 billion a month in Treasuries and mortgage-backed securities. “But even if there is some trivial short-term benefit to QE, policy makers should be focusing on the longer-term perils of QE that are likely far more important.”
Einhorn says the Fed’s bond buying prompts some questions about income inequality and the ability of central bankers to deal with the next recession. Specifically, he asks in his letter:
* How much does QE contribute to the growing inequality of wealth in this country and what are the risks this creates?
* How much systemic risk does the Fed create by becoming what Warren Buffett termed “the greatest hedge fund in history”?