![]() All the old things that we used to think mattered don't matter anymore. We can go to zero interest rates, budget deficits, don't matter. And this has given rise to an idea that, well, maybe we don't have to have any pain ever anytime anything happens, we’ll just flood it with more liquidity. We had very low growth, but the longest expansion, certainly in my lifetime. We would have to go back to what was the old normal, but a funny thing happened, I think over the last 10, 15 years is that there wasn't any further crisis. I guess, the idea at the time was that eventually, we're going to have to deal with this. ![]() We had a debt problem and we're going to cure it with more debt. They flooded the world with liquidity, debt didn't really matter. And the decision that was made, probably the correct one, was they did do whatever it takes. We didn't really know what was going to happen. I think that that was probably in my career, the scariest time for markets, for economies. I guess what he did was probably the first time where the ‘whatever it takes’ policies were used and that first set the stage for what they called the Greenspan Put, which was simply, hey guys, you don't have to worry about really bad stuff happening because the Fed's got our back.Īnd so for 20 years, that's what we dealt with through various different crises, the Russian bond crisis, the tech boom, and then crash up until we got to the GFC. Fast forward, a number of years you've got Alan Greenspan comes in, he’s the Fed Chairman who immediately has to deal with a stock market crash. However, there was moral hazard and risk tolerance was probably a bit lower than it is today. Obviously, there was a lot of cycles, there was some pain on the downside. That was really the thing, we knew there were cycles and the way that markets dealt with it, and usually, a pre-emptive fashion was that economic policy was an input to investment decisions. In fact, I can remember my mother pinning a button on me that said ‘WIN’ on it when I was going to school, which stood for whip inflation now. And the target was really the real economy and the enemy at this stage was inflation, or when I was younger, stagflation, in fact. The tools were all the old familiar faces of interest rates, liquidity, money supply, reserve ratios, those kinds of things, fiscal spending, tax rates, et cetera. They’d ease when things were bad, they’d tighten when things were good. I guess when I was a younger man or even in school, policy was all about controlling the cycles. But I do believe that it's grown from over the last 30, 40 years, really. Well, Alan, I think that there's no doubt we're in a situation now that's unprecedented, at least in my lifetime in terms of how economic policy is set, and what those policies are. ![]() Monetary policy focused on markets rather than the real economyĭavid, you've been talking about the new normal, what's your version of the new normal and how did we get here? What is the 'new normal' & how did we get here? Here he is David Rosenbloom of ICN Consulting. But now David is, you know, he's not one of these people who are vociferously against MMT, he just is sceptical about it and being an investment consultant, he tends to turn that into advice about what to do with your money and how to invest it. We've obviously had a few MMT promoters on including Stephanie Kelton and Warren Mosler. But I thought it'd be a good idea to get someone who's a bit of an MMT sceptic. He's a longstanding asset manager who was with ARCO Investment Management, then Janus Henderson and before that, Wallara Asset Management. David Rosenbloom is an investment consultant who has his own firm called ICN Consulting.
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