Monetary and fiscal policies are leading to ‘significant inflationary danger,’ economist Roger Bootle says

Roger Bootle
  • Economist Roger Bootle says monetary and fiscal policy is leading to “significant inflationary danger.”
  • Bootle said demographic changes, US-China tensions, and costly climate policies will only add to the problem.
  • The Fed and a number of other market commentators have maintained inflation will be “transitory.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Monetary and fiscal policies are leading to “significant inflationary danger,” according to Capital Economics chairman Roger Bootle.

In an interview with Bloomberg on Wednesday, Bootle repeated his concerns about inflation and criticized other economists and market commentators for their view that monetary and fiscal policies aren’t important when it comes to rising costs.

“Money supply doesn’t matter. The stance of policy doesn’t matter. You’ve got all these cost reductions, and you’ve got competition. I find all this terribly funny because there’s been globalization in Venezuela, Zimbabwe, Turkey, and all the other countries that have had quite rapid inflation,” Bootle said.

“When it comes to it, it’s the stance of monetary policy, the buildup of these big-money balances in the hands of households. The stance of fiscal policy. The very low-interest rates. I think this is what really makes this a particularly dangerous thing,” he added.

Bootle went on to say that current inflationary pressures are not on the scale of what was seen in the 1970s, but demographic changes and increased costs due to US-China tensions and climate policies will add to inflationary pressures moving forward.

There has been a heated debate among economists, banks, and analysts about inflation recently. Some argue, as the Federal Reserve does, that inflation is only “transitory” and will settle down once supply chain issues resolve themselves.

Others, like Bootle, argue that a rapid increase in the money supply along with dovish Fed policy could lead to sustained rising costs.

Despite the pandemic coming to an end, the Federal Reserve has pledged to maintain accommodative policies, including low-interest rates and aggressive asset purchases, until “substantial further progress” has been made toward employment goals.

After last week’s jobs report showed the US economy added 559,000 nonfarm payrolls in May, market commentators wondered if the Fed might change its tone.

Comments from Cleveland Federal Reserve President Loretta Mester in a CNBC interview on Friday showed the Fed appears to be doubling down on its view that substantial further progress needs to be made before they change policy.

“I view it as a solid employment report…But I would like to see further progress,” Mester said.

Roger Bootle’s new comments come on the back of Deutsche Bank’s recent warning of a global “time bomb” due to rising inflation if the Fed doesn’t act.

“The consequence of delay will be greater disruption of economic and financial activity than would otherwise be the case when the Fed does finally act,” Deutsche’s chief economist, David Folkerts-Landau, and others wrote in a note to clients.

“In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets,” the team added.

Read the original article on Business Insider

Billionaire investor Leon Cooperman blasted stimulus efforts, flagged a bond bubble, and warned of a brutal market crash in an interview this week. Here are the 11 best quotes.

Leon Cooperman
Leon Cooperman.

  • Leon Cooperman criticized the federal government for pumping up the US economy.
  • The billionaire investor said low interest rates and stimulus are pushing investors to take risks.
  • The Omega Advisors boss warned of a brutal market crash once conditions worsen.
  • See more stories on Insider’s business page.

Leon Cooperman blasted the federal government for juicing a booming economy, predicted rising inflation will prompt an interest-rate hike next year, and warned markets will nosedive once sentiment shifts during a Bloomberg Surveillance interview this week.

The billionaire investor and Omega Advisors chief also blamed the Federal Reserve for investors taking greater risks, highlighted a bubble in the bond market, and questioned the need for greater regulation of family offices.

Here are Cooperman’s 11 best quotes from the interview, lightly edited and condensed for clarity:

1. “It’s the advance of greed basically. The fact that the industry would get into the same predicament again is kinda surprising. The more things change, the more they remain the same.” – comparing the recent collapse of Archegos Capital, which sparked over $10 billion of losses for the banks that lent it money, to Long-Term Capital Management blowing up in the late 1990s.

2. “I’m a retired money manager living on investment income. I run my own money. Why they have the right to regulate me is beyond my wildest dreams.” – questioning the SEC’s plans to increase oversight of family offices.

3. “I describe myself as a fully invested bear.” – Cooperman explained he doesn’t currently see the factors that cause bear markets such as accelerating inflation, a hostile Federal Reserve, and recession fears, but he expects the backdrop to change.

4. “The biggest plus out there is the Fed has created an environment where there’s an absence of alternatives.” – arguing that near-zero interest rates have pushed investors into riskier assets such as high-yield bonds, stocks, and cryptocurrencies.

5. “We are borrowing from the future. Interest rates shouldn’t be where they are, and we should not be injecting so much fiscal stimulus when the economy is growing off the charts.”

6. “The market’s gonna be surprised because the Fed will raise rates sometime in 2022. They’ll be forced to by inflation.”

7. “Everything I look at would suggest caution, intermediate to long term, would be the rule of the day.”

8. “On NFTs, bitcoin, stuff like that – I’m too old. I don’t understand that stuff, it’s crazy to me, it makes no sense. I’m a meat-and-potatoes guy, a stocks guy.”

9. “The bubble is not so much the stock market, the bubble is the bond market.”

10. “They’re not cheap stocks, but they’re not expensive stocks. Nothing is expensive if interest rates stay here.” – commenting on “big tech” stocks and echoing Warren Buffett.

11. “When this market has a reason to go down, it’s gonna go down so fast your head’s gonna spin.”

Read the original article on Business Insider