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Former Dallas Fed Vice President Gerald O’Driscoll on the Federal Reserve policy’s impact on the economy.
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-- my next guest would give the Fed and F.
If you were rating its work he says policy is very much part of the problem and it's time to triple the rate -- -- already.
Hike those rates and raise interest rates sooner rather than the 2015.
-- that they put on the calendar -- -- Driscoll Cato Institute senior fellow.
And former Dallas Federal Reserve vice president joining me now on -- -- this is exclusive from Reno Nevada.
I'm -- an -- I mean.
I I understand how you feel about this but especially because -- you talked -- -- you say this is an artificial rebound that they have.
Engineer let's use that -- And yet I would say that a lot of Smart people have given Ben Bernanke thumbs up in many cases for example around Lou Dobbs who feels that.
They did what they had to do I was talking to some Russians.
-- -- big in business overseas Lisa central banks -- -- but why do you feel they deserve an F grade and does that go for.
All thirteen semesters that we passed over the past several years.
Well I don't know if I said -- -- -- they need it that you -- they did the right thing you know wait.
You know back in the Lehman failure and so on -- and they provided liquidity the market but now what they're doing is making.
Whole asset classes in segments of the economy.
Dependent on more stimulus -- the problem is it going to take more and more stimulus to run an economy.
On fumes basically.
-- the course -- underlying factors normal market factors that are helping the economy recover so two things are going on.
But look I think the housing is already worrisome housing prices.
And do they reflect some special factors so.
It and and the low interest rates are great for borrowers if they can get the money but they don't mode motivate creditors to -- the -- OK so it's almost net net neutral right okay so you're you're saying -- in essence what John Taylor said in the Wall Street Journal yesterday.
Near zero is great because yes it makes people want to borrow.
Doesn't make one lenders lend because they're not getting a great rate on the money that they get but they're at least getting something.
So and then -- question becomes if not 2015.
When should they tighten rates and I'm very much -- push a lot of people on this I can't get a straight answer may be a camp for new.
How would the world in the markets react the minute the Fed telegram ups were ready to tighten rates.
All I think you'll have a sell off the minute they telegraphed that they're going to raise rates not the minute they raise rates but the minute they telegraph.
I'll tell you what I think they will -- rates not until they see the whites of the eyes of inflation.
And by that I mean I I would be I'm amazed if they.
Underground on rates before inflation is in the 33 and a half percent range possibly higher.
I don't want to get.
To walking about this and two in the weeds but when you look at something that -- Charlie Brady from our Simon just pointed out I was at the Saint Louis fed adjusted monetary base.
This is as if you took an entire steaming melting pot and threw in everything the Fed has done and you superimposed.
It.
Over the Dow Jones industrials they pretty much mirror each other so which propping up what's happening -- people into assets like equities.
You know what that overlay completely.
Switch out.
But part of that analysis I mean I have not seen that analysis but it doesn't surprise me yeah I mean it's what I'm trying to say.
It -- the stock markets the asset and whole segments of the economy.
Are dependent on.
Not just continuing stimulus but going into the future will take more work to do the same thing.
Cheerio Driscoll of the Cato Institute he's a senior fellow and he's also the former Dallas Federal Reserve vice president.
Thank you so much shall we will be right back.
