Einhorn to Quantitative Easing: Drop Dead
Hedge-fund manager David Einhorn is a big critic of quantitative easing — and he thinks the U.S.'s current monetary policy should essentially be reversed.
Speaking at lunch time Thursday to guests at The Economist's annual Buttonwood Gathering in New York, Einhorn, who manages nearly $8 billion, argued that zero-level interest rates were stunting the country's economic growth. (Read More: Wall Street Gaming Romney Win: 'Trillions at Stake)
While low rates may have been necessary in the depths of 2008, Einhorn said, years of diminished returns to savers have begun to change consumer behavior, creating a "hoarding" effect rather than spurring spending.
Restoring jobs, consumer activity, and higher GDP levels would require an about-face by the Federal Reserve, Einhorn added. But such a shift would have to be accompanied by "careful messaging" because an abrupt hike in rates could risk a "blow up" of certain derivatives books.
(Read More: Another Hedge Fund Veteran Throws in Towel)
Einhorn said he also questioned the wisdom of economists who back continued QE — a group that seems increasingly at odds with traders like him. "Aggressive policies" are creating "tail risks," he said, and a "reflexive groupthink" has developed among the country's leaders that leaves little room for economic policy debate.
-By CNBC's Kate Kelly