Greatest Moral Hazard, Says Paul McCulley, Is Austerity Here And Now
October 4, 2011
The last Thoughts from the Frontline featured an interview of me by Kate Welling. I promised another interview she did with my friend Paul McCulley, who (warning) is a consummate Keynesian. For him (paraphrasing closely), prescribing austerity for the US is like putting an anexoric patient on a diet. While Paul and I are very good friends, we do not agree on what to do about the current morass. But this is Outside the Box, and the point is to have views that I don’t agree with. And Paul is nothing if not an articulate proponent of the neo-Keynesian view. The original publication of his interview in Kate’s letter drew some very pointed comments. Right up the OTB’s alley.
Kate Welling is simply the best at doing
interviews and teasing out controversy, but her work is hard to for the average
person to access, as it is now just for institutional clients. I have convinced
her to break out of her shell and offer it to the retail world. She is working
on the “details,” such as price, etc., but in the meantime you can go to welling.weedenco.com
And in the interview, Paul talks about what his new “gig” will be after PIMCO. He is working with David Kotok to launch the Global Interdependence Center Global Society of Fellows, a most worthy group and effort, which I heartily applaud. The GIC encourages the expansion of global dialogue and free trade in order to improve cooperation and understanding among nation states, with the goal of reducing international conflicts and improving worldwide living standards. You can learn more at www.interdependence.org.
Tonight I am in Geneva and was hosted by Lord Alex Bridport, founder of one of the largest bond brokerage firms in Europe (if not the largest). I will report back Friday. It is an interesting time to be in the markets. OK, one tidbit. He confirmed that banks (and not just in Europe) are really as bad as they look. And with that note, have a good week!
Your going to be 62 in a few hours analyst,
Shedding Light On Problems Facing The Fed
July 10, 2006
So exactly how far is the Fed going to go? Are they done? Perhaps another raise in August? Could that not even be enough? These are all questions of uncertainty that have the faces of investors looking more puzzled than ever over Fed policy. In my Friday letter I commented on how the Fed is concerned about inflation, and how it is still making them uncomfortable pegged in the high end of their range. In this week's "Outside the Box," Paul McCulley, to much surprise, confesses that he wears Austrian shoes (as in Austrian economics), and explains the risks to the markets of central banking policy.
A current Managing Director at fixed income powerhouse PIMCO, Paul is an intelligent thinker and economist who always provides an insightful perspective on the markets. He is a self-confessed "religious Keynesian" with respect to his views on monetary policy. In his July "Global Central Bank Focus," Paul discusses his thoughts on targeting asset prices and its affects on inflationary pressures.
I think you will find this piece helps shed some light on the problems facing the Fed and the reasons for the fog surrounding Fed policy.