NOBEL PRIZE WINNER FAMA TO CNBC'S SANTELLI: 'There's So Much Confusion In What You Said It's Difficult To Answer'

Nobel prize winner Eugene Fama was on CNBC earlier today to discuss the Federal Reserve and its extraordinary monetary policy.

CNBC's Rick Santelli asked specifically about the effects of the Fed's quantitative easing program and the risks associated with it.

"What they are doing... the effects are being greatly inflated by the accounts," said Fama.

"What they've doing is issuing a lot of short-term debt - $85 billion a month - and using it to buyback long-term debt with the goal of lowering the interest on long-term debt," he added. "Now they take credit for lowering interest on short-term debt. But in fact what they've been doing should've raised rates on short-term debt."

Fama argued that the Fed was not affecting the economy that much.

Santelli, however, continued to pursue the idea that there are risks associated with the Fed's actions.

"They're basically neutral events," said Fama. "I don't think they do very much."

"Nobel prize winner Eugen Fama has done his homework on QE and seems to understand the basic accounting behind it that so many others misinterpret," said Pragmatic Capitalism's Cullen Roche who first pointed us to this video.

But Santelli kept pursuing this line of questions, and tensions began to rise.

"Let me interrupt you," Santelli interruped at one point. "If it's no big deal, then why don't all central banks just do this to the nth degree and make it a constant day to day week to week event where they purchase what's issued, keep interest low, and just target a low rate forever. Why won't that work then?"

"There's so much confusion in what you said it's difficult to answer," responded Fama.

Watch the whole exchange here: