Stephen Roach on CNBC
CNBC has a lot of good guests on this week. Here’s another clip from earlier today. This time it’s Stephen Roach talking about asymmetric monetary policy and financial bubbles. Roach believes the Fed needs to entirely rethink its policy stance which Roach describes as allowing asset bubbles to form and cleaning up after the mess. In his view, this policy was a major contributor to the financial crisis and he believes renewed signs of froth are already upon us, principally in the emerging markets. Roach believes the Fed must also take financial markets into account in addition to full employment and price stability when making policy decisions.
I certainly agree with Roach that the Fed’s asymmetric policy is dangerous. However, from a forecasting perspective, I think his view is not going to get a hearing right now. Policy makers are very concerned with the weakness in labour markets and will do everything they can with monetary policy to encourage risk taking as a sort of trickle down support for job growth.
Since the talk of the town is that the dollar is becoming worthless paper. So why bother to save? Just party buy and buy while still can before the dollar turn into paper.
Since the talk of the town is that the dollar is becoming worthless paper. So why bother to save? Just party buy and buy while still can before the dollar turn into paper.
Yes the current policy is just as dangerous. Fiscal policy is off the table and monetary policy does not work so the US and UK have similar problems. The problem is that the only solution that will work (fiscal) is not even being considered.
Meredith Whitney is probably right that hundreds of billions of muni debt will be worthless. Though will the Fed do a QE 3 to bail out the states? In 2007 Roubini and others claimed that the big banks were insolvent. Yet through concerted Fed action they managed to get bailouts for AIG, which end out bailing out the banks. TARP also bailed out the banks. The relaxation of the market valuation of worthless assets helped immensely. So are the banks solvent? I think not. They have not earned or raised enough capital to get them out or trouble.
Will the same happen to muni debt?
Yes the current policy is just as dangerous. Fiscal policy is off the table and monetary policy does not work so the US and UK have similar problems. The problem is that the only solution that will work (fiscal) is not even being considered.
Meredith Whitney is probably right that hundreds of billions of muni debt will be worthless. Though will the Fed do a QE 3 to bail out the states? In 2007 Roubini and others claimed that the big banks were insolvent. Yet through concerted Fed action they managed to get bailouts for AIG, which end out bailing out the banks. TARP also bailed out the banks. The relaxation of the market valuation of worthless assets helped immensely. So are the banks solvent? I think not. They have not earned or raised enough capital to get them out or trouble.
Will the same happen to muni debt?