LOS ANGELES, Aug. 30, 2018 /PRNewswire/ -- Danielle DiMartino Booth, one of the rare Wall Street professionals to serve inside the Federal Reserve, guides listeners on a deep dive into the weeds of the world's central banks and harvests a bumper crop of causes for concern in the latest edition of The Sherman Show podcast.
To listen to the complete podcast hosted by DoubleLine Deputy Chief Investment Officer Jeffrey Sherman and Portfolio Manager Sam Lau, please go to the DoubleLine podcast page: https://doubleline.com/podcasts/
Ms. DiMartino Booth is perhaps best known for her best-selling account of what she observed first-hand at the Dallas Federal Reserve, Fed Up: An Insider's Take Why the Federal Reserve Is Bad for America. After a successful career at the former investment bank Donaldson, Lufkin & Jenrette in New York, she was invited by Richard Fisher, then-President of the Federal Reserve Bank of Dallas, to join the Dallas Fed as an analyst. She worked as analyst there for nine years. She discovered within the Federal Reserve System an enclave of academics devoted to political ideology and theoretical models rather than objective analysis of the real world.
Today, Ms. DiMartino Booth is the CEO and Director of Intelligence at Quill Intelligence, LLC, a research and analytics firm. She is a much-sought after speaker on financial markets at conferences and by news media. In May 2018, Ms. DiMartino Booth was invited to Brussels by members of the European Parliament to share her insights on global economic trends and fiscal policy.
As Ms. DiMartino Booth relates in her conversation on The Sherman Show, the world's central banks assume that quantitative easing (QE) is a "permanent tool" which can readily be deployed in the event of financial crises. However, she warns QE may be ineffective in the next recession – being that QE has already led to negative interest rates in parts of the world and abetted the "deflationary impetus" of $250 trillion of debt.
Ms. DiMartino Booth warns against the danger of assessing the Fed's balance sheet "in a vacuum." While the Fed has embarked on reversing the QE policies initiated in the credit crisis, a policy shift referred to as quantitative tightening (QT), she observes the Fed's QT has been more than offset by QE by the European Central Bank, the Bank of Japan and the People's Bank of China.
"What people don't understand is that in October 2014, when the Fed stopped growing its balance sheet and just moved on to a reinvestment pure policy, that there was a hockey stick movement in global QE and that the pace of QE actually picked up. So 2017 was obviously the year of complacency and record number of days that the VIX was south of 10, etc. But it should be with a global QE run rate of $2 trillion," Ms. DiMartino Booth explains. "This was Lehman and AIG blowing up every single month. This was DEFCON 1 record levels of global QE in 2017."
Among other topics, Ms. DiMartino Booth discusses the tax and tariff policies of the Trump administration. The tax cuts have obviously had "some effect" but have been "largely offset by the tariffs." She also observes that the tax cuts have "not spurred any kind of capital expenditure boom …." The mass of liquidity unleashed by the cuts, she says, has "stunted" the effect of the Fed tightening.
On a positive note, Ms. DiMartino Booth gives high marks to Fed Chairman Jerome Powell. As laid out in her book Fed Up, Ms. DiMartino Booth reiterates her criticism that the Fed has long suffered from being staffed by academics with no practical experience in the real world, depriving monetary decision-makers of information and analysis relevant to address unfolding developments in the markets and economy. Mr. Powell, however, had a highly successful career in private equity, giving him both real-world experience as well as the personal financial independence to stand up to political pressure. "You couldn't have a better man at the helm right now," she says.
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