We love David Rubenstein. Rubenstein, co-founder and co-executive chairman of private equity firm The Carlyle Group, is an American financier and philanthropist.
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Rubenstein had an interview with Fed Chairman Jay Powell last week at some Economics Club. The back and forth was something we wanted to watch and hear. We thought he asked SOME substantive and important questions but sorry, for us, overall it was too cutesy.
Cutesy is not good. We believe Rubenstein had a missed opportunity.
We do not think there is anything cute about $22 trillion of debt. We do not think there is anything cute about trillion-dollar yearly deficits. We do believe it has been the Fed who has enabled a lot of this. So in the interest of fairness, here is what we would have asked Jay Powell.
No. 1: What do you tell all the savers that were screwed by the Fed by keeping rates at 0% on their risk-less income investments for 8 years?
No. 2: Why since 2009, every time the markets get in trouble, the Fed either talks easier money or enacts easier money? (We would show Powell a chart going back to ‘09, including what markets have done leading up to his changed stance right at the recent lows.)
No. 3: Why do you keep calling it the Fed's balance sheet? A balance sheet is supposed to contain real assets. Your "supposed" assets is nothing but the Fed printing money out of thin air.
No. 4: You just said you fought to have the debt ceiling raised. Many years ago, it was a sin to raise the debt ceiling. Politicians fought against raising more debt but now, you, economists, politicians and ratings service have conned everyone by saying that if we DON'T raise more debt, we would be in trouble. What happened to economics 101 that says more debt, out of control debt, is bad?
No. 5: Depending on which abacus you use, there is $15-20 trillion of central bank-printed money around the globe. Europe is still printing and has negative rates. Japan is still printing and has negative rates. China is easing markedly it seems every week. Are we to the point where what central banks have done has made markets addicted to your steroids and there is no way out of this web?
No. 6: And to that point. We are starting to see recessionary-like numbers from places like Japan and Germany. What ammo could they possible have left if this is true?
No. 7: Where would the markets be and where would economies be around the globe if all central banks just normalized?
No. 8: Will we ever be normalized?
No. 9: There is now more than $250 trillion of government debt (record corporate debt, record junk debt) around the globe with many saying it has been enabled by the ridiculously low rates brought on by the central banks. What happens if economics 101 finally come into play and the markets stop reacting to everything central banks say or do?
No. 10: You do know that economics 101 states that the more debt there is, the higher the rates should be? But former Fed Chairman Bernanke et al artificially kept rates down that enabled all this debt. So what if rates finally give the middle finger to central banks (that have rigged rates lower for years with the conjured up money that you say are assets but are not really assets) and skyrocket? What is your next move if, let's say, the 10 year yield goes to 5 percent, regardless of your futile attempts to print more money to take them down?
No. 11: Do you think this economics 101 scenario can play out? Is the magic number $260 trillion? 300 trillion? Higher?
No. 12: Did you know that in the coming year, because of all the debt, the first $500 billion of precious taxpayer dollars is going towards interest on the debt that was created by government? That's $500 billion not going towards the poor, the indigent, the children, the elderly, the roads, bridges and all the infrastructure promised. $500 billion to nothing. Did you know this and how do you feel about this?
No. 13: If the Dow Jones Industrial Average dropped 2,000 points in the next two weeks, what would be your reaction? How about a 5,000 Dow point drop over the next 2 months? Should it continue to be the Fed's place to react to these market moves?
Mr. Powell, thank you for your time. We know that we asked some tough questions but numbers do not lie. We are very worried. It seems many of the same people who put us in this position are still running the show and simply showing they do not give a crap about doing anything about all of this.
We are now starting to see you go into your friend's playbook that many call the "Bernanke put." Instead of letting markets be free, it seems you are now measuring yourself based on market moves and we worry this will do more harm longer-term than good shorter-term. After all, markets were supposed to be free and not move based on the whims of a few people running central banks around the globe.
We would have loved to ask you about your bicycle riding or your guitar playing or your salary, but we think there are much bigger fish to fry going forward. We wish you well. Ladies and gentlemen, that concludes this interview.
Gary Kaltbaum is a registered investment advisor with more than 30 years of experience in the markets. He is owner and president of Kaltbaum Capital Management, a financial investment advisory firm headquartered in Orlando, Florida. He is a Fox News Channel Business Contributor regularly appearing on Fox News Channel and the Fox Business Network. Gary is the author of the book “The Investors Edge” and is also the host of a nationally syndicated radio show with the same title “Investors Edge” which is broadcast on numerous stations across the U.S.