Why You Can’t Blame The Fed For Ultra-Low Interest Rates And Soaring Asset Prices
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 11 June 2020
⏱️ 43 minutes
🧾️ Download transcript
Summary
One of the characteristics of the pre-crisis (and perhaps also the post-crisis) economy is the presence of very low interest rates, and financial asset prices that are expensive by historical standards. Of course, a lot of people are inclined to blame the Fed for this. But the real issue precedes the Fed, and in fact the Fed (and other central banks) are only responding to political decisions that depress consumption, investment and inflation. On this episode, we speak with Jon Turek, the author of the Cheap Convexity Blog, about how policies all around the world that suppress consumption and encourage exports are the real policy choices that lead to low rates and expensive financial assets.
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| 0:45.0 | I'm Joe Wiesenthal. |
| 0:46.0 | And I'm Tracy Allaway. |
| 0:48.0 | So Tracy obviously still in the middle of this ongoing crisis and I think like one of the big |
| 0:56.2 | questions that I've wondered about or something I've been talking about for a |
| 1:00.6 | while and thinking about is whether it would lead to any substantive |
| 1:05.9 | meaningful economic policy changes going forward that causes the economy to look at different than it did pre-crisis. |
| 1:15.3 | Yeah, I think that's right. I think there's a sense or a desire that after the worst economic |
| 1:21.4 | crisis in decades or possibly in modern history you would want to see some sort of change, something to happen to the global economy so that the next time something like this occurred, |
| 1:33.6 | you wouldn't see as big of a knock-on effect on the economy. |
| 1:38.1 | But do you ever get the sense |
| 1:40.8 | that things sort of become more entrenched rather than changed? |
| 1:45.3 | Yes, it does feel like that. And I have to say like, I don't know like what the future holds, |
| 1:51.5 | but you know, today we're recording this June 4th. I'm less I think it's you know I feel |
| 1:58.3 | less confident today than I would have say in early April that this crisis will lead to some sort of major change in policy, |
| 2:09.3 | some sort of major demand side change or major change in how the world trades like it's not over and we still |
| 2:16.5 | don't know the lingering effects at all and unemployment remains sky high still so they are like incredibly serious issues but at the moment |
... |
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