The Federal Reserve policy of beefing up its balance sheet—including $600 billion in additional quantitative easing (QE)—could lead to recession by 2013 or 2014, Guggenheim Partners CIO Scott Minerd told CNBC Tuesday.
“The Fedincreased the size of its balance sheet by 25 percent in the run-up to January 2000, Y2K,” said Minerd. “That increase in liquidity fueled the bubble that we had in the Nasdaq. When the Fed tried to reverse a 25 percent increase in the size of its balance sheet and go back to normal, it caused a recession."
Guggenheim is an investment management firm with $100 billion under supervision.
“Now you look at the current situationwhere we’ve increased the balance sheetalready by 150 percent, and you think we’re going to get this back out without having some kind of financial problem or economic problem, I just don’t buy it.”