Econintersect: Prof. Richard Ebeling, Northwood University, discussed the state of markets and the economy on Power Trading Radio Friday with Merlin Rothfeld and John O’Donnell (31 January 2014). Eberling said that the recovery from The Great Recession has been almost entirely due to monetary expansion by the Fed and not from growth in real economic activity. He says that inflation risk will increase when the excess reserves held by the Fed “leak” into the real economy via increased loans.
A further point Prof. Eberling made was that concerns about the Fed ending in a negative income situation when interest rates rise is a non-problem. The possibility of “unwinding” the Fed balance sheet at a loss is of no concern. He says (paraphrased) that the Fed can’t lose money, they create it.
- Weekend Edition with Dr. Richard Ebeling (Power Trading Radio, 31 January 2014))