Antti J. Ronkainen: So let’s go back to beginning. When the Great Financial Crisis escalated in 2008 the Fed’s response was to lower its main interest rate to nearly zero. Why?
Antti J. Ronkainen: In addition to the near zero interest rates, the Fed bought US Treasury bonds and mortgage backed securities (MBS) with almost $4 trillion during three rounds of Quantitative Easing stimulus. How have these measures affected the real economy and financial markets?
Antti J. Ronkainen: Do you believe Mike Whitney’s argument that QE was about a tradeoff between the Fed and the government: the Fed pumped the new bubble and saved the banks that the government didn’t need to bail out more banks. The government’s role was to impose austerity so that inflation and employment didn’t rise – which would have forced the Fed to raise interest rates, ending its QE program?
Antti J. Ronkainen: According to a Fed staff report, QE would lower the exchange rate of dollar to the other currencies causing competitiveness boost for the U.S. firms. Former finance minister of Brazil Guido Mantega, as well as the chairman of Central Bank of India Raghuram Rajan, have described the Fed’s QE as a “currency war.” What’s your take?
Antti J. Ronkainen: You have said that QE is fracturing the global economy. What do you mean by that?
Antti J. Ronkainen: The Democrats loudly criticized the Bush administration’s $700 billion TARP-program, but backed the Fed’s QE purchases worth of almost $4 trillion during the Obama administration. How does this relate to the fact that officially, QE purchases were intended to support economic recovery?
Antti J. Ronkainen: How do TARP and QE relate to the Federal Reserve’s mandate about price stability?
Antti J. Ronkainen: Why don’t economists distinguish between asset-price and commodity price inflation?
Antti J. Ronkainen: If there is a new class war, what is the current growth model?
Antti J. Ronkainen: Does the Fed realize global turbulences what its unconventional policies have caused?
Antti J. Ronkainen: China’s stock market has crashed, western markets are very volatile, and George Soros has said that the current financial environment reminds him of the 2008 crash. Should we be worried?
Antti J. Ronkainen: That’s all for now. Thank you Michael!