Bernanke “Laying the Groundwork” for More Easing, Says El-Erian

With his speech this morning in Jackson Hole, Wyoming, Ben Bernanke has prepared the markets for additional quantitative easing – according to PIMCO CEO Mohamed El-Erian.

In an interview with CNBC following Bernanke’s comments, El-Erian contended that “First, Bernanke provided a very robust defense of what he’s done so far. Secondly, he told usp Problems were cyclical, not structural. And finally, he told us that costs are containable, they’re manageable. So, in my opinion, he is laying the ground for more activism from the Fed.”

When asked where he would invest based on his outlook, El-Erian mentioned gold as one of several asset classes that would help protect against the currency debasement inherent in the Fed’s easy monetary policies.

Several other market observers offered a similar take on the Fed Chairman’s remarks, including Goldman Sachs chief U.S. economist, Jan Hatzius.

In a report to clients, Hatzius wrote that “Fed Chairman Bernanke’s Jackson Hole speech makes the case for unconventional monetary easing–in particular, balance sheet and communication policies–as an effective tool, even if the ‘hurdle is higher’ for the use of such policies. In a dovish conclusion, he notes the poor state of the labor market as a ‘grave concern’.”