(Kitco News) - The Federal Reserve has backed itself into a corner, which means it might be time for quantitative easing to make a comeback, this according to mining maverick and Fed critic Frank Giustra.
Speaking with Kitco News, in an exclusive interview, the Leagold Mining chairman said he doesn't expect the central bank to deliver the rate increases it has promised. Instead, it might look to ease again.
"They'll continue to talk about normalizing rates and they'll find excuses not to," he said.
"I think the next accident that happens - whether it's a stock market crash because stock valuations are at all-time highs now and we are ready for a major correction there - any event that causes crisis in the system will be met by further easing and another version of QE."
Giustra said that he expects the next version of quantitative easing will be "helicopter money."
"Basically what it means is that the Federal Reserve instead of lending through the banks, loans directly to governments so they can use it for fiscal measures," he explained. "I equate it to the fact that you gave your irresponsible, delinquent children a bunch of money, they blew it and now you're going to give it to the squabbling parents."
In other words, the actions taken by the Fed in response to the 2008 financial crisis never fixed the root problem, he explained.
"We papered it over with cheap money and that's made a small segment of the population very rich but it certainly hasn't helped the economy," he said.
According to Giustra, the solution will take a lot of time and for that reason, it likely won't happen.
"I think a solution requires a complete - and it's not going to happen, politically I mean, it's not going to happen - 10-year mandate to really restructure education, vocational training, clean technology, and creates jobs," he said.
"When you're in a political system where you have an election every 2 years, it's impossible to implement, you can't get it done because there's too many special interests."By Sarah Benali
For Kitco NewsFollow @SdBenalisbenali@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities,securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.