John S. Tobey, a multibillion-dollar fund manager, wrote in Forbes that the Fed has lost control of the financial crisis. The headline summarizes his argument: “Inflation and Interest Rates Rise—Fed Loses Control.”
Tobey says what the Fed is proposing to do as cures—taper and raise interest rates—"are not wrong—They are just late in coming.… Can the Fed maintain a sound financial system (the Fed’s main goal) while reversing 14 years of excess? There are many reasons the Fed could ignite a financial firestorm that would spread to businesses and consumers. (A chilling scenario is what might happen when the same actions are taken by all the other countries that have followed the Fed’s easy money lead.)”
Tobey, a monetary “hawk,” concludes: “It’s unclear whether the Fed has the will—or the ability—to end all this. Or if it even knows how to taper the bond-buying program without sending interest rates sky high, choking off the nascent economic recovery and freaking out everyone now addicted to low interest rates.”
