|
Central banks are now so heavily influencing asset prices that
investors are unable to ascertain market values, former Federal Reserve Board
of Governors member Kevin M. Warsh told the
Stanford University Institute for Economic Policy Research tonight.
This influence is especially evident, Warsh
said, with the Fed's purchase of government bonds, which has made it
impossible for investors to use bond prices to learn anything about markets.
Warsh, who disclosed during GATA's freedom-of-information litigation with
the Fed in 2009 that the central bank has secret gold swap arrangements with
foreign banks (http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf), added that the Fed is trying to do too much and
the rest of the government not enough to encourage economic growth.
While he said nothing explicitly about gold, Warsh
seemed to come pretty close to your secretary/treasurer's observation almost
four years ago that there are no markets anymore, just central bank
interventions. (See http://www.gata.org/node/6241.)
Warsh was especially critical of the federal government's efforts to
stimulate the housing market. "The government-sponsored housing entities
remain sources of vulnerability to the U.S. economy," he said, "and
repeated ad-hoc attempts to push Fannie Mae and Freddie Mac to take greater
risks at taxpayer expense are deeply counterproductive." Such efforts
have not succeeded, he added.
Warsh said higher real incomes are far more important to economic growth
than recovery in the housing sector.
He said he opposed pursuing economic recovery through inflating debt
away and devaluing the currency.
Warsh was the youngest person ever appointed to the Fed board, resigning
eight months ago after five years in office, and is now a distinguished
visiting fellow at the Hoover Institution at Stanford and a lecturer in the
university's Graduate School of Business. He received his undergraduate
degree at Stanford in 1992 and a law degree at Harvard three years later. He
was special assistant for economic policy under President George W. Bush and
executive secretary of the National Economic Council. He was also a member of
the President's Working Group on Financial Markets, commonly known as the
Plunge Protection Team.
Warsh spoke tonight from an outline he provided to GATA and then answered
questions from his audience, which included Stanford faculty and students.
The outline is appended.
Warsh's talk was broadcast live at the Internet site of the Stanford
Institute for Economic Policy Research --
http://siepr.stanford.edu/
-- and video of it is expected to be posted there shortly.
|
