Goldman Sachs (GS) Guy says Central Banks Should Buy Stocks

Jim O’Neill, chairman of Goldman Sachs (GS) Asset Management, says is A-OK for central banks to buy equities.  The subject came up in the context of the Bank of Japan more than doubling its investments in equity exchange-traded funds by the end of next year.  ”The Bank currently holds ¥1.4 trillion ($14.1 billion) in ETFs with a target of ¥3.5 trillion ($35.3 billion) in 2014,” according to the Business Insider.

“Frankly, it makes a huge amount of sense in a world of floating exchange rates and such incredible opportunity, why should central banks keep so much money in very short term, liquid things when they’re not going to ever need it?” O’Neill said. “To help their future returns for their citizens, why would they not invest in equity?”

Is it the job of central banks to make a return for it’s citizens?  The Fed is making huge profits and I haven’t seen a dime.  What gives?  What happened to the dual mandate:  low inflation and low unemployment?

O’Neill says ”it’s a great time to own equities” for individual investors.  Really, because central banks are buying equities?  Central banks have historically displayed the worst timing in the world in buying and selling gold for instance.

But stop at stocks.  Why don’t central banks buy small businesses or automobiles or anything people want to get rid of?  Go big or go home.

About Douglas French 16 Articles

Affiliation: Agora Financial

Douglas E. French is senior editor of the Laissez Faire Club. He received his master's degree under the direction of Murray N. Rothbard at the University of Nevada, Las Vegas, after many years in the business of banking. He is the author of three books, Early Speculative Bubbles and Increases in the Supply of Money, the first major empirical study of the relationship between early bubbles and the money supply; Walk Away, a monograph assessing the philosophy and morality of strategic default; and The Failure of Common Knowledge, which takes on many common economic fallacies. He is founder and editor of LibertyWatch magazine.

Visit: Laissez Faire Club

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