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David Stockman: Zero Interest Rates Are Insane

Sunday, April 7, 2013 - 11:20 AM
Former Reagan budget director David Stockman was on ABC This Week today along side Paul Krugman. Two quotes from Stockman that got my attention:

“Savers are being crucified”

“Zero interest rates are insane”
15
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,675
1. Sunday, April 7, 2013 - 1:30 PM
When you have a round table of millionaires discussing "zero interest rates" I'm not surprised that the only adult in the room is David Stockman.  The remainder of the panelists surely have a stake in that the free money continues for Wall Street with the resulting positive effect on their portfolios.
5
ShorebreakShorebreak2,365 posts since
Apr 6, 2010
Rep Points: 12,596
2. Monday, April 8, 2013 - 8:19 AM
The fed's statuatory mandate is low inflation rate and full employment. Low interest rates are a consequence of the fed's policy. If any of us have a solution for low inflation and full employment we should express them. It is easy to criticize  but not easy to have a solution. Missed the program but wonder if Stockman had a solution or is he just another guy who is trying to make money complaining with no solutions?
4
AllyAlly774 posts since
Jan 16, 2010
Rep Points: 2,256
3. Monday, April 8, 2013 - 9:01 AM
.

Dear rosie43,

Exactly!  We have seen rabid criticizm of the FOMC on this blog, yet noone has offered any solution whatsover as to how to overturn/amend the dual mandate given to FOMC.

It was quite refreshing to read your post.

Yours Truly,
- Anon
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
4. Monday, April 8, 2013 - 5:35 PM
The Fed's solution hasn't done much for "full employment" at all and will lead to high inflation down the road if Bernanke's ZIRP keeps going. When the Fed buys securities that money goes to Wall Street, not Main Street. Since 2009 the Dow-Jones index has risen 1000 points each year and the NASDAQ has doubled. Meanwhile the Main Street economy continues to languish barely above recession levels, contributing to extremely weak small business loan demand from their only direct connection to Fed liquidity: banks.
7
ShorebreakShorebreak2,365 posts since
Apr 6, 2010
Rep Points: 12,596
5. Monday, April 8, 2013 - 9:01 PM
Dear Readers,

This guy writes about the future with total certainty: "FMOC's policy will lead to high inflation".  Just another example of rabid criticizm.

Yours Truly,
- Anon
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
6. Monday, April 8, 2013 - 9:11 PM
It is kind of hard to have higher employment especially with the FICA tax increase along with sequestration. Both are working against spending and more jobs. 
1
AllyAlly774 posts since
Jan 16, 2010
Rep Points: 2,256
7. Tuesday, April 9, 2013 - 8:30 AM
It is kind of hard to have higher employment especially with the FICA tax increase along with sequestration. Both are working against spending and more jobs. 

From what you said, which is a sound point, then the best way to encourage a growing economy (and with it, jobs) would be cutting taxes. Unfortunately, that cannot be expected given the current environment in Washington. In all fairness to the FOMC, it seems that its pursuit of ZIRP is because, given counterproductive economic policy in Washington, it is the only weapon it has to fight unemployment and to shore up a weak economy. Is it working? Would the situation be worse had it not been for ZIRP? No way of telling a future contingent event.

4
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,281
8. Tuesday, April 9, 2013 - 10:36 AM
Dear Wil,

Your words also are in stark contrast to the rabid FOMC bashing that goes on around here.

We have no way of knowing if the situation would have been better/same/worse, absent the ZIRP.  And we have no way of knowing if the ZIRP will result into higher (according to some double/triple digit) inflation.  My hope/guess is that over next quarters/years the unemployment will gradually come down, and inflation will remain tame.

What we know for sure is that FOMC is required by law to combat both unemployment and inflation at the same time. I admire the public servants who are doing this fight, on our behalf using the tools we have given to them.

Yours Truly,
- Anon
6
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
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