Author John Mauldin to Moneynews: Fed Has US Hooked on 'Morphine'

Friday, 25 Oct 2013 07:55 AM

By Glenn J. Kalinoski

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Author John Mauldin compared the Federal Reserve's quantitative easing program to morphine being injected into the American economy.

"The Fed now is building up a systemic problem," Mauldin told Newsmax TV in an exclusive interview.

"They have put too much money into the system. They are continuing to put us on morphine, if you will, which was appropriate in 2008, 2009. The patient came in, he was bleeding, you have to stabilize the patient, but then they failed to take us off the morphine, so now we are hooked on it."

Editor’s Note: Obama Donor Banned This Message (Shocking)

The Federal Open Market Committee last month unexpectedly refrained from cutting its $85 billion in monthly bond purchases, saying it was waiting for more signs of sustained economic improvement, according to Bloomberg News.

"The Fed even hints that they're going [to] take $5 billion or $10 billion out of a $4 trillion balance sheet and they're going to start taking that away," he said.

"They're not going to cut. They're just going to reduce the amount of extra money they're putting in. Then the market throws a fit. Then the interest rates go up and that puts us into a trap because now, the Fed says, 'Well, gee, the economy's getting weaker because interest rates are rising, we can't take you off of it.'"

The author of "Code Red: How to Protect Your Savings from the Coming Crisis" was also asked about the next financial crisis.

Editor's Note: To order 'Code Red' at a great price — Click Here Now.

"In the United States, we will have enough time to deal with our deficit and our debt," he said. "We're in control, but if we don't deal with it, then we're going to be at a place where we have fewer choices and the choices that we have today are merely difficult ones. Our choices are going to become bad choices because we're going to end up having to cut spending in areas that we don't want to cut, or we're going to have to end up having to raise taxes because we're going to lose access to the bond market."

Also covered during the wide-ranging interview was the possibility of soaring inflation in the future.

"If you mean 4 or 5 percent, absolutely," he said. "If you mean 10 or 15 percent, no. This Federal Reserve will do the right thing when you start seeing inflation getting into the high single digits. They'll get nervous, they'll pull back. None of them want to ever get back to the '70s again where you have to have a [former Fed Chairman] Paul Volcker come in and just [stomp] on the neck of the economy for three or four years and you see 10 or 11 percent unemployment."

Mauldin added that he is "pretty much agnostic" about the price of gold.

"I'm afraid it's going to go up," he said. "I hope it doesn't, and some of your viewers here are just going to go crazy. Gold is insurance. I buy some every month. I get little coins, and I put them in the vault, and it's central bank insurance. I don't think they're going to do anything stupid, but, just in case, I buy some gold. I buy fire insurance. I buy health insurance. I hope desperately never to have anybody ever use my life insurance, but I have the insurance nonetheless."

Editor’s Note: Obama Donor Banned This Message (Shocking)

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