Jim Rickards: This Is A Race Between The The Fed Trying To Achieve The Goals And The All System Imploding
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Welcome to Capital Account. It's Federal Reserve Interest Rate Decision day! As expected, the Fed announced it will expand its bond-buying program with 45 billion dollars a month in longer-term treasury securities, after the conclusion of Operation Twist at the end of this year. In a different sort of twist, the Fed also announced it is now tying interest rate guidance to economic guide posts. The FOMC released a statement announcing that they anticipate the "exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored." At the press conference Bernanke announced that the FOMC members would take into consideration a variety of metrics for determining inflation, but how will the Fed use this data to make its long term inflation predictions? We ask Jim Rickards of Tangent Capital Partners if this gives the FOMC more subjective leeway to ignore potential high short term price inflation. He explains that this gives the Fed the room to tell the public "inflation is what we say it is."
Plus, is it better to fuel exports through dollar devaluation or innovation and investment? If you think it's the latter, unfortunately US corporations cut an estimated 175 billion dollars in investment from 2009 -- 2011. According to the Wall Street Journal, the S&P considers this cut in investment unsustainable. We talk to Jim Rickards, author of "Currency Wars," about the best way to boost exports.
And yesterday's interview with MMT economist Stephanie Kelton created quite a storm amongst proponents of various economic schools, including Austrian, Neoclassical Keynesian, and Modern Monetary Theorist. Demetri gives his take on the interview with Stephanie Kelton, and why he thinks MMT has a pretty good grasp on how the monetary system works, but why the prescriptions for progress and how to "run" an economy are flawed. The interview also got the attention of a previous guest of ours, Mike Norman; Lauren and Demetri respond to him at the end of today's "Loose Change."