Europe is doing everything they can to boost their economy, but former Federal Reserve Governor Lawrence Lindsey says more stimulus is not solving their problems.
During an interview with the FOX Business Network’s Maria Bartiromo, he broke down what the measures mean.
“It has the ECB now picking winners… They’re now going to start buying high grade corporate bonds. That’s the rich helping the rich in European context… The high-grade corporates in Europe don’t need financing. It’s small business that needs financing…deregulation. It needs reduction in taxes, things like that,” he said.
While the markets are expected to have a positive reaction, Lindsey says it’s only temporary.
“What Central Banks can do is drive the price of financial assets higher, at least temporarily. If I buy your corporate bonds your equities are going to go up too. Are you solving any economic problems? Promoting economic growth? No, that’s a very different question -- and that’s why ultimately [you will see] a selloff,” he said.
Lindsey also shared his views on the U.S. economy.
“I think we are a bumping along the way we have been bumping along. We have a very low productivity economy. That means you have very modest economic growth. You add a lot of jobs, but they’re not good paying jobs and real wages continue to be on the weak side,” said The Lindsey Group CEO .
While Lindsey sees only about a forty percent chance of recession in the U.S. he says the only way to get out of it through structural reform.
“Low interest rates buy you time, but they don’t force the people to make structural reform. We have excess capacity globally but all zero rates do is allow the excess capacity to linger longer and longer and longer.”