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By Joseph N. DiStefano
A day after the Federal Reserve Board of Governors voted to pump another $1-trillion-plus into the economy, U.S. stocks and the dollar fell, and oil and gold rose. Not exactly a vote of confidence in the USA's radical attempt to save jobs by risking massive inflation.
"Nothing like this has ever been attempted before. The risk of failure is therefore quite high," warns veteran bank analyst Richard X. Bove, lately of Rochdale Securities in Connecticut.
"The Federal Reserve is taking a calculated risk," he told clients in a note. "What the central bank sees as likely is a reduction in interest rates, increased lending, higher sales activity, inventory building, and renewed capital expenditures."
If it works, Bove said, "prosperity will return. Equity values will soar. Financial companies will be primary beneficiaries."
If not? Dollars "would become valueless, eliminating [their] usefulness in averting problems in the United States economy," he predicted.
Bove concluded, "This is almost a heads-or-tails move, with the result being 50 percent in each direction.