Senator Rob Portman (R-OH) offered up one of the more insightful comments/observations during yesterday’s session with Federal Reserve Chairman Janet Yellen, at least according to this New York Times account of the gathering.
You don’t hear much talk about the relationship between relatively low capital investment and the actions of the central bank to prop up the economy and financial markets, but maybe we will after remarks like this.
“I worry that the Federal Reserve is trying to use its monetary policy hammer to solve a problem that’s really not a monetary problem and at some risk of doing so,” said Senator Rob Portman of Ohio.
Companies, he said, would not invest “no matter how low interest rates go” because they were frozen by uncertainty about the economic outlook.
Mr. Portman suggested the Fed could help by ending its stimulus campaign because it had become a crucial source of the uncertainty.
Of course, Yellen responded by saying monetary policy is not a panacea and, since I didn’t witness this exchange, it’s impossible to know if there were any body language cues that might shed more light on what she really thinks about the subject.
It makes sense that, after 20 years of increasingly large asset bubbles that all ultimately meet their pins, business owners would be increasingly cautious, particularly after the latest one and the Fed’s response to it. The issue is further complicated (and not in a good way) by the fact that just about everyone in the world except the Fed thinks central bank policy has been a major factor in inflating said bubbles and it’s also worth pointing out that this group doesn’t have a very good track record of spotting bubbles as they’re developing.