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The Economic Road Ahead
In our continuing effort to understand and predict where the Puck is going, I am excited to announce that soon on the podcast we will be hosting Christopher Leonard, author of the newly released The Lords of Easy Money: How the Federal Reserve Broke the American Economy.
Chris cogently explains how we have created the greatest potential threat to the American economy since the founding of the republic. Dramatic? Perhaps. But the facts speak for themselves.
One of the many fascinating portions of the book centers on Thomas Hoenig , president of the Federal Reserve regional bank in Kansas City in 2010. Between 2008 and 2014, the Federal Reserve printed more than $3.5 trillion in dollars, and Hoenig was often the lone dissenting vote against taking such measures. His reasoning is outlined in Leonard’s December 28th piece for Politico , The Fed’s Doomsday Prophet Has a Dire Warning About Where We’re Headed. I’d recommend reading this brief and insightful piece.
While former Fed Chair Ben Bernanke has been seen by many as the savior of the American monetary system based on the actions he took in the aftermath of the 2007 crash, I suspect history will show that while the initial response to the crisis was necessary, the continuation of quantitative easing beyond 2008, planted the seeds of a financial catastrophe that we will be facing in the coming year. It is impossible to expand the Fed’s balance sheet by more than eight trillion dollars, continue to buy worthless corporate debt, and bail out failing hedge funds without unintended consequences.
Bernanke, as a student of history, was right to be concerned with the danger of deflation and erred on the side of Keynesian economics. He printed money. The tragedy was not getting off easy money beginning in 2010 and continuing to increase our country’s indebtedness. At worst, our current situation could end in the destruction of the value of the dollar, and we would be left with the challenges that Germany faced with inflation in the 1920s.
Where is the Puck going? We believe that what goes up must come down and that we will be tested economically in the not-too-distant future. Issues such as political polarization and income inequality have historically been linked to both price and asset inflation. Asset inflation, Leonard writes, tends to disproportionately favor the wealthy, which only deepens our socioeconomic divide.
But here is the bottom line. Read The Lords of Easy Money: How the Federal Reserve Broke the American Economy and see what Chris Leonard and Thomas Hoenig have to say.
CATCH UP ON RECENT PUCK EPISODES
https://podcasts.apple.com/us/podcast/episode-36-scott-painter-of-nextcar/id1338978270?i=1000544198124
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https://podcasts.apple.com/us/podcast/episode-33-maury-blackman-of-premise-data/id1338978270?i=1000538443382
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