Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

The Fed Has Promised Too Much and Can Only Deliver Bubbles (Video)

  by    0   3

In an interview on Bloomberg, former Morgan Stanley chief economist Stephen Roach tears apart the monetary policy of the Federal Reserve. Roach explains that Ben Bernanke has blatantly admitted that the Fed’s goal is to stimulate the economy by growing asset bubbles.

Roach’s indictment of the Fed and the US economy is severe, but he couches his language carefully:

We need to sort of wean ourselves from the temptation to juice up our asset markets to derive temporary satisfaction from bubble-induced economic growth.”

Translation: the Fed needs to get out of the way and stop manipulating the markets with quantitative easing and abnormally low interest rates. The worst part is that the Fed’s strategy only enriches the financial elite while forcing Main Street to deal with the real effects of secular stagnation.

Highlights from the interview:

Stephen Roach: We have tried to squeeze too much juice out of the lemon… We’ve opted for financial engineering through bubbles. That provides some temporary gratification, but ultimately comes back to bite you with the balance sheet recessions that occur in aftermath of the bursting of the bubble — we’re in one right now…

We’ll definitely having difficulty in dealign with another piece of bubble-induced economic activity, as we’re doing right now. The debt overhang is there. The inability of the economy to generate sustained job growth and income generation through normal economic fundamentals remains a profound problem for the US economy…

We do have an excess of supply over demand. We’ve been on the demand side of the equation, the United States, for a long time. The emerging economies, especially my favorite one, China, have been on the supply side. They’ve been producers. The world needs to rebalance and realign and get more demand out of the producers and less demand out of the excess consumers like the United States. We need to live within our means. Countries like China really need to step up and stimulate internal private consumption. They’ve just begun that process…

We need to sort of wean ourselves from the temptation to juice up our asset markets to derive temporary satisfaction from bubble-induced economic growth. Ben Bernanke [said], ‘We can opt to create financial bubbles from time to time if we can’t lower real interest rates below the negative two-percent level.’ That’s an explicit admission of what’s gone wrong with monetary policy. Bernanke admits that he’s tried to use bubbles to stimulate economic growth…

Brendan Greeley: If what you’re saying is right, it’s not just the economists who need to adjust their assumptions. It’s everybody. It’s voters, it’s people saving for retirement. We have an entire system built upon this assumption of post-war growth.

Roach: We’ve promised too much and we’ve delivered poorly on those promises. Every time we get into a growth problem, we seem to go for more juice from asset markets to address that problem, and that’s not the way to do it…

Tom Keene: We’re almost in a bi-modal America, two Americas. We’ve got an America really doing pretty well, and another group of America where it’s just not happening. Do we need a Fed that needs to do their day-to-day work looking at two Americas, or can they just assume a great macro economy?

Roach: The Fed’s got blunt instruments. They have a hard time directing a piece of that stimulus to one part and a piece to the other part. What they’ve been doing with QE is they’ve been providing a lot of wealth for wealthy people. And that doesn’t really address the middle-class problems…

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

New Peter Schiff Interview: We’re Paying the Price for Deficits

Last week, Peter was interviewed on Speak Up with Anthony Scaramucci. In their conversation, they covered a wide range of important topics, including inflation, the fate of the dollar, and the trade-offs between gold and cryptocurrency. 

READ MORE →

Dollar Down 20% Since 2020, Biden Blames Greed

Assuming CPI measurements are not understatements, the dollar’s value has plummeted by a staggering one-fifth since 2020, yet, rather than acknowledging its role in fueling this economic turmoil, the Biden administration deflects, casting capitalism and corporate greed as the villains. The latest February CPI data show more signs of the upcoming inflation bloodbath.

READ MORE →

The Myth of Fed Neutrality

Powell follows the president's wishesThe Federal Reserve is often viewed as a neutral guardian of the economy, tasked with safeguarding employment and ensuring stable prices. However, the Fed is run by individuals who, like anyone else, are swayed by certain motivations. Do the people behind the Fed truly have the incentive to remain impartial? Our guest commentator demystifies the […]

READ MORE →

Peter Schiff: Gold is the Canary in the Economic Coal Mine

This weekend, Todd Sachs interviewed Peter on the state of the economy. They discuss the parallels between now and the 2007-2008 housing crisis, the role of economic sentiment in voters’ opinions, and why foreign central banks are losing faith in the dollar.

READ MORE →

Massive Deficit Spending Tows US Economy Forward

A truck titled "US gdp" tows along another car, the US economyRampant government spending continues to mask fundamental weaknesses in the US economy. Recently, national debt grew much faster than the economy for the third quarter in a row, just one of many warning signs concerning legendary investors. Our guest commentator explains just how much the government is spending to make the economy seem strong, even […]

READ MORE →

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Call Now