Phil Cannella – Phillip Cannella News

Phil Cannella: “Are these bond purchasing

programs creating a bubble that will eventually pop and cause problems for the everyday investor?”

Andrew Huszar: “I think that there’s always a risk reward. That’s how I would have looked at it when I was sitting in my seat in The Fed. What are the costs of the program versus what are the benefits? To me, the benefits are pretty minimal and to me, the costs are one, that we are pumping up Wall Street and letting them get back to where they were, which I think was too big and too powerful in our economy, and two is that we are setting up the financial markets for a fall when The Fed stops buying, and I do think that’s where your listeners, being people who worry about their investments and want to be sure they have a secure future, they have to be really careful. What The Fed basically has done is, it has basically killed the return on bonds and so it’s pushing more and more retirees, for example, into stocks. And there’s a short term benefit of that, but stocks as we’ve seen are very volatile, so I think people have to be careful about how much they commit their savings to a policy that is looking more and more artificial and has some real danger to it.”
Phil Cannella: “In that case, is The Fed ignoring the long-term effects their actions will have on the economy?”

Andrew Huszar: “I think what’s happening is we are getting very short-term oriented in our thinking in America. In this constant media cycle, where we’re thinking day-to-day about what’s happening, there’s a real temptation to try and do a lot of short-term things that help- that help juice the conditions and make things look better in the short-term, but are long-term very ill-advised and inefficient, and I think that’s what’s happening. I think the Government is ultimately trying to, rather than make some really difficult moves in terms of actually arguing possibly for more Government spending, but smarter Government spending and cutting other programs that just aren’t working, we’re just doubling down on policies that aren’t working, and with the hope that it’s just going to get us through the next six months or the next year. The reality is, I think, five years ago with this financial crisis we actually had a moment where we should have said to ourselves, ‘in the last 25 years or so in our economy there was a lot of benefits to it but there were a lot of costs. This financial crisis ended up being very painful and maybe we should think about tweaking what we’re doing’, and instead I think we keep on seeing the same approach, and to be fair I think it’s the same approach from both political parties. I think both these political parties are wedded to a certain idea of how the economy should work and how much it should be reliant on Wall Street and the reality is, let’s get back to investing in education, infrastructure, making our economy more competitive.”

Phil Cannella: “Wouldn’t we have been better off taking that $85 billion from Quantitative Easing and use it for public works?”

Andrew Huszar: “Well I think to be fair to The Fed, The Fed doesn’t have the ability to go out and make those investments. I am 100% on the same page as you, that’s what we need to be doing. The reality is The Fed looks at the rest of Washington, throws up its hands, and says, ‘these guys can’t get anything done, so even though our tools aren’t ideal, let’s try to do something to help the average American’, but the reality is, I believe, that all it’s doing is feeding complacency about what needs to be done. If you look at the Senate, there’s a bill in the Senate called “Brown-Vitter” that has some really credible reform about Wall Street banks that has bipartisan support and is just sitting there languishing. If you look at the house, there’s a bill that talks about infrastructure development in the United States and has some really interesting ideas about infrastructure development, which again has bipartisan support at least from members of both parties, and it as well is languishing. So I think we are getting into this very defeatist part of time where we say to ourselves, ‘we just can’t get anything done in Washington so let’s just try to do a less good thing’, and the reality is, I think, that’s defeatist and in the end its leading us down the wrong path.”

Hear more from the interview with Phil Cannella and Andrew Huszar on The Crash Proof Retirement Show®. Saturdays at 11am and Sundays at 1pm on Talk Radio 1210AM, WPHT!