Steve Forbes after 9/11: "The Fed should keep this money hose on"

The Federal Reserve has admirably pumped significant liquidity into the economy, thereby easing the increasingly deadly deflation that we've been undergoing for at least three years.  But the benefits of this, other than avoiding immediate panic, won't be fully felt until the Fed publicly announces that this reliquidity is permanent, not temporary.  The dollar gold price, the most sensitive measure of monetary stability or instability, has moved from roughly $270 to $290 an ounce.  The Fed should keep this money hose on until the yellow metal reaches $300 to $325 an ounce.  Don't stop now, Alan.  You're almost there.

~ Steve Forbes, "Not There Yet," Forbes, October 15, 2001

Larry Lepard on what Fed policy is doing to the middle class

They are causing the middle class to suffer.  For Jay Powell to say "the Fed doesn't cause wealth inequality" is just complete and utter bullshit.

~ Larry Lepard, interview with Daniela Cambone, Stansberry Research, 20:20 mark, September 24, 2021

Almost Daily Grant's on the year in credit

A year to remember in credit, as the March panic has quickly given way to something resembling an opposing extreme.  Last week, the Goldman Sachs Financial Conditions Index reached its most accommodative level on record going back to 1990, while total corporate bond issuance foots to a record $2.5 trillion for the year according to Bank of America.  Thanks to that borrowing spree, gross leverage among investment grade and junk borrowers has reached record highs near four and six times Ebitda, respectively, the Financial Times reports today. 

Needless to say, the Federal Reserve’s March 23 announcement that it would, for the first time, directly purchase investment-grade corporate debt, loomed large in the bond market’s dramatic turnaround. Indeed, Jonny Fine, U.S. head of debt syndicate at Goldman Sachs, describes those interventions to the FT as: “the most important piece of central bank policymaking I have seen in my career.”

~ Almost Daily Grant's, December 22, 2020

Steve Mnuchin: "Now is not the time to worry about shrinking the deficit"

Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet. There was a time when the Fed was shrinking the balance sheet and coming back to normal. The good news is that gave them a lot of room to increase the balance sheet, which they did. And I think both the monetary policy working with fiscal policy and what we were able to get done in an unprecedented way with Congress is the reason the economy is doing better. 

~ Treasury Secretary Steve Mnuchin, interview on CNBC’s "Squawk Box” from the White House, September 14, 2020

Jerome Powell on inequality and monetary policy

Inequality is something that’s been with us increasingly for more than four decades and it’s not really related to monetary policy.

~ Jerome Powell, Federal Reserve chairman, June 10, 2020

Jim Grant on interest rate management since 2000

The federalization of American finance didn't come of a clear, blue, free-market sky.  The government has met every cyclical disturbance since 2000 with lower interest rates and heavier applications of what is fastidiously called "financial repression."

~ Jim Grant, "A short history of making things worse," Grant's Interest Rate Observer, May 1, 2020

Jerome Powell warns about the risks of creating asset bubbles

I think we are actually at a point of encouraging risk-taking, and that should give us pause.

~ Jerome Powell, October 2012 FOMC meeting

Jim Grant is asked about Fed chairman Jerome Powell's press conference and stock market's negative reaction

Grant: I don't think it's a matter of communications policy.  I think it's a matter of substance.  To me, the clear and present risk is the consequences - unintended though they may be - of ten years of suppressed and distorted interest rates with the attendant distortions in both the so-called real economy and especially in the financial economy where leverage has been piled upon leverage.

CNBC: So this is inevitable, this kind of negative reaction.

Grant: Certainly after ten years of the lowest interest rates, literally in the 3,000 years of recorded history.

CNBC: We get that you didn't agree with the policy before, but right now are they making a mistake?

Grant: It's not a question of agreeing with it.  The consequences of ten years of distorted interest rates are things that we can't always see, but which are nonetheless there.  For example, the distortions of the leveraged loan market with fine print that's supposed to protect investors has been eviscerated or written down.  Green investments proliferate because there are no interest rates.  Interest rates are meant to measure risk, discount future cash flows and set investment hurdle rates.  When those things are absent or distorted, decisions in real time - real things - are not as they might be.  And exactly what is wrong is revealed in time.  Now, the stock market is a forward looking indicator.  The economy is not a forward looking indicator, right?

~ Jim Grant, interview on CNBC, December 19, 2018

Steve Forbes advocates aggressive easing after tech bubble unwind (2001)

With glacial speed, Alan Greenspan is coming around to the view that a faltering economy, not incipient inflation, is the most immediate threat. But instead of moving speedily, the Federal Reserve will soon begin a series of baby-step reductions in interest rates. This sluggish, woolly-mammoth-like response is a danger.

Longer term, though, there is another potential hazard. The Fed could fall into the trap in which the Bank of Japan finds itself: Interest rates are cut and cut and cut, yet the economy doesn’t recover. The U.S. experienced such a phenomenon in the 1930s, when Treasury bill rates were almost 0% and unemployment remained in double digits until the Second World War. Pushing on a shoestring, it was called.

~ Steve Forbes, "Going the Way of Japan?," Forbes, January 22, 2001

Kevin Duffy on how Milton Friedman was guilty of data mining when studying the Great Depression

Milton Friedman studied the Great Depression and noticed that money supply dropped by one-third from 1929-1933.  He came to the conclusion that this was the cause of the depression and that the Fed hadn't acted strongly enough.  He also influenced a guy by the name of Ben Bernanke who, at Friedman’s 90^th birthday party, vowed not to make the same “mistake.” 

Did the Fed really sit by idly as Friedman claimed?  Actually, no.  The Fed acted aggressively, buying government securities and expanding its balance sheet from 1929-1933.  It also lowered the discount rate from 5% to 1 ½%.  Friedman appears to be guilty of data mining.  Correlation doesn’t prove causation.  In fact, gold flows and loss of confidence in banks were contributing factors to the contraction in money supply.  If anything, the monetary inflation of the Fed probably made matters worse.

~ Kevin Duffy, "Mr. Market Flunks the Marshmallow Test," Grant's Spring Conference, March 15, 2017

Niall Ferguson on the limits of monetary policy

The main lesson to be learned this year is the limit of monetary policy.   The story last year was that the Central Banks are the only game in town. The story this year, is that despite stimulus spending which is simply an anti-volatility policy, the economy will not achieve “escape velocity.”

I predict that the limits of monetary policy will be witnessed by the end of this year. We have a structural economic policy problem – not a monetary one.

 

~ Niall Ferguson, Harvard historian, speech given at the 10^th annual Strategic Investment Conference in California, May 3, 2013

Randall Kroszner on continued dovish Fed policy

Until we see sustainable job growth the punch bowl is not going to be taken away.

~ Randall S. Kroszner, former Federal Reserve governor, as appeared on CNBC, April 10, 2013

Jamie Dimon on US fiscal discipline and policy coordination

The United States needs to show fiscal discipline. We need to show it for ourselves, not because of China, not because of S&P. I’m hopeful we can show that soon.

I want to see America grow again. We need a little bit of coherent, consistent, coordinated policy.

If you know me at all, I am not suited for politics. Anyone who runs a company and gets out in the field would say the same things I do.

~Jamie Dimon, CEO, JP Morgan, CNBC, August 10, 2011

Bill Miller on historical Fed-induced buying opportunities

Historically, when the Fed starts to tighten, when it moves from 'accomodative' to 'neutral', you get a pretty significant correction in the overall market. That's always been a buying opportunity. The real problem comes when you move from 'neutral' to 'tight'. When the Fed starts talking about imbalances and they're trying to correct imbalances. So, you could get a correction, and there are going to be corrections along the way, but anywhere from the zero-bound right now to, call it 2-3%, is not going to be a significant drag on equities.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Argentine central bank chief denies monetary connection to price increases

The price problem doesn’t have monetary roots. The conditions that could cause inflation to accelerate don’t exist in Argentina.

~Mercedes Marco del Pont, president, Central Bank of Argentina, Bloomberg Markets Magazine, "No One Cries for Argentina", March 28, 2011

Jim Grant on the transition of the US monetary system and the third Fed mandate

I think the difficulty with monetary policy is the nature of the policy itself. We have, over the years gradually, persistently elided [sp?] from a gold standard to a PhD standard. We have moved from central banking to a species of central planning. What our well-intended scholar, monetary policy mandarins are about is the manipulation of the economy, manipulation of interest rates and now, the manipulation of the stock market. You know, they had two mandates confirmed by Congress and they unilaterally have taken up a third, which is the levitation of stock prices.

~Jim Grant, author, Grant's Interest Rate Observer, CNBC's Kudlow Report, March 31, 2011

Jeremy Siegel on the potential for Fed tightening

There's so many steps to go before we hit [a point where the Fed feels compelled to tighten] and Bernanke is going to give a speech that is going to say, you know, 'Our strength is now showing, we're going to remove some of the accomodation'. It'll first come probably with moving just the discount rate and then finally some moves on the Federal Funds, it's not going to come all of a sudden. 'Cause, despite how bad the inflation numbers were on the PPI and the CPI this week, the Core were almost exactly on target. That is what the Fed is looking at so there is no reason for a precipitous move right now. They just have to keep their eyes open for problems.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

Jeremy Siegel says the bull market is intact, but Bernanke must be watchful

There's always things for the market to worry about. I start worrying when no one worries. Then we're at a top for the market.

In terms of when the Fed starts raising, history shows that, yes, there is a little tremble, a little correction that comes in, but the early tightening by the Fed does not stop a bull market. It's only the very late tightening when they really have to move against the excesses and the inflation that we really see stocks having trouble.

So, there certainly will be a flutter when Bernanke has to make that shift but my feeling is that won't stop the bull market. Also, one must remember that mild inflation, even 2 to 4%, a little bit above the Fed's target, has actually been a sweet spot for stocks historically. Stocks are real assets, they tend to move with prices, it gives corporations and firms pricing power, so I'm not worried about a mild inflation. I think that's not going to be a problem for stocks. Obviously anything more than that, 5, 6%, the Fed would have to move very aggressively.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

Ray Dalio calls for a "seismic shift" in international monetary policies

I believe that sometime in the next 18 months, we will probably have a seismic shift, very similar to the Bretton Woods breakup in 1971, in which linked monetary policies and linked exchange-rate policies come undone. The pain of holding them together is going to be terrible, and that's going to create the seismic shift

~Ray Dalio, founder and CIO, Bridgewater Associates, Barron's Magazine interview, March 12, 2011

Alan Greenspan says "Not bad", gives his monetary policy credit following '08 Dow plunge

Greenspan brought up the fateful day in September 2008 when the Dow Jones industrial average plunged 6.98 percent. However, life picked up for him after the initial shock.

"The morning after we learned of the news," he said, "I was able to look myself in the mirror and say, 'Hey, not bad.'"

According to Paulson, the recovery process has been rather "tepid." Greenspan attributed the slow recovery to excessive government activism.

"What I'd suggest is that we calm down; let the economy heal by itself," he said. "But we are doing better now with the halting of more stimului and programs like 'Cash for Clunkers."

Greenspan also emphasized that the future health of the housing sector would depend on the phasing out of "contradictory" government-instilled institutions like Freddie Mac and Fannie Mae, whose objective of providing affordable housing conflicted with the necessity to "maximize profit for shareholders."

~Alan Greenspan, former Fed chairman, "Greenspan, Paulson discuss politics and economy", NYU Washington Square News, February 17, 2011