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Weekend as well well the Federal Reserve announcing another round of money -- yesterday Ronald Reagan's budget director David Stockman calls the move quote.
And wonders whether capitalism itself will survive more doctor Bernanke's medicine.
David Stockman former Reagan budget director joins me now David great to see a guide to beer madness the end of capitalism you're not a little overwrought -- you know I think it's pretty serious this isn't.
Is QE IT infinity they've told -- They're going to print money and they're gonna buy bonds -- they run out of bonds are gonna buy all the MBS.
And has it is just that this program they're buying half of the monthly issue of mortgage backed securities from all those wonderful agencies.
That we have in Washington Fannie Freddie Ginnie.
Half of them.
There is some categories of bonds that don't even exist anymore because the Fed or other central banks in the world -- them.
So what's this is is the beginning or may be the beginning of the end of the destruction of financial markets interest rates don't know what interest rates don't mean anything in the Fed holds the overnight rate.
To zero through 256.
Years of zero interest rates.
When it manages main goals and manipulates the yield curve what signal.
What pricing information does that give the financial markets -- this clearly being administered.
And manipulated by the Fed -- ways -- Ben Bernanke is going to be meeting with senate finance leaders -- on on Monday from both parties.
It does kind of sound reminiscent of of 2000 temper 2008.
When the financial crisis was was have you do you think that weird that close.
To things exploding I think it's more a case of the cat calling the kettle black what is Bernanke doing up on the hill talking to them about the fiscal problem.
He is the primary creator of that so whenever price target about the fiscal -- -- we should be talking about a lot of monetary cliff but also he has driven interest rates so low that for the first five years of the treasury yield curve you can borrow under seventy basis point you can borrow three years that 35.
To congress to Capitol Hill that's the equivalent of zero it's free money.
Why should they bite the -- make tough -- felt like I'd like somebody giving an alcoholic a drink he CIA believes congress -- and well in order to -- outward -- okay I'll give us his -- gets to duties were on this one -- to maintain the value of the currency obviously there's the value of the dollars is has has felt fallen tremendously hasn't shown itself up as inflation quite yet but there the devaluation is clear.
But he's also supposed to keep unemployment down and unemployment is not -- how was escorted affect the real economy.
Well it's pretty clear that we've had a massive explosion the Fed's balance sheet they've been buying bonds hand over fist creating money like there's no tomorrow since September 208.
And the unemployment is still very high if we measured it honestly would be more than 11% if you don't count.
Millions that have dropped out of the workforce so this isn't working and is simply.
Putting money into the financial system fueling Wall Street speculation after all you get free money just put into your carry trade do you buy anything with the yield.
And it is not helping -- just gonna try really can't -- I I agree on -- I'm gonna try to reach floor for some kind of explanation for Bernanke.
When you're investing -- stock market -- investing in assets are investing in companies that have real assets that -- make things as opposed to investing in gold or something so.
With with his moves if you put your money in the market you or investing in assets rather than that the gold carry trade for example nobody here buying assets whether their fixed income or whether they're the Russell 2000 her whether it's some company.
That is probably vastly overvalued.
Because when you put the ten year interest rate at one point 7%.
Way below the -- -- a rate of inflation that's sub economic bad isn't real.
You're basically inflating.
All asset prices real estate companies.
Everything on what happens when a currency loses its power which is what you're saying it's happening well I think what happens the real question is what happens when a Central Bank.
Because what they're doing now is there going all they -- they don't even have a limit on this -- said until -- either -- the Europeans your -- Central Bank is doing the same thing -- David that's right that until unemployment gets to some level that we think is the full employment who knows in this impaired injured economy worry him.
We're gonna keep buying hand over fist if we run out of bonds and mortgage backed securities will buy the Russell 2000 if we run -- of that will -- moon beams.
And you know monetize those so I think.
We have a Central Bank.
That is out of control we have a Central Bank.
That is basically declared itself the monetary Politburo.
Of the whole US economy it's almost an economic who the -- could be -- we got primarily out of Reagan did believe in a strong dollar right he certainly did and any reportedly been -- for earnings and he didn't believe in the kind of craziness.
This on the federal he had Paul Volcker is the Fed she that's not to have another act of a difference -- to -- -- David thank you very much have a good week if you can't get any sleep based on.
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