More on Kevin Warsh interview - wants lower rates ...Middle East

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The headlines are here from earlier:

Former Fed Reserve Governor Warsh says tariffs not inflationary, has sympathy for Trump

Warsh was speaking in an interview on Fox. More:

what the Fed needs is regime change. Regime change means new sets of policies, new way of thinking about economic growth, a new understanding of what really drives inflation and also means new personnel.This isn't 1978 economics anymore, where we think that inflation is caused by high wages. Inflation's caused by this growth of moneyto underscore the point, back in the '08 crisis, we cut rates to zero. We decided because the economy was racing away from us, we'd create this new instrument called quantitative easing. And about every trillion dollars we grew the balance sheet, we thought roughly was worth about 50 basis points of cuts. If you look right now, and you could take down that balance sheet, a couple trillion dollars over time in concert with the Treasury secretary, that's a big rate cut that could come. And what you would do then is turbocharge the real economy where things are somewhat tougher and ultimately the financial markets would be fine. Why is it that financial market conditions are so loose? The IPO markets are booming. You got all that money racing around, it's not helping the real economy as much as an interest rate cut would.

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I'm not sure I'm following Warsh here. He said in '08 that quantitative easing was a form of rate cut

"about every trillion dollars we grew the balance sheet, we thought roughly was worth about 50 basis points of cuts"

And now he is saying that quantitative tightening is also a rate cut?

"you could take down that balance sheet, a couple trillion dollars over time in concert with the Treasury secretary, that's a big rate cut that could come"

Let me know in the comments!

This article was written by Eamonn Sheridan at www.forexlive.com.

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