It really is a shame that David Malpass fell short in the primary to run for U.S. Senate in New York, because he is such a useful and provocative voice on economic policy. His voice is still there, it's just heard primarily by his Encima Global clients rather than by the wider audience that would hear a senator. If we are lucky he'll end up at the Federal Reserve or the Treasury Department in a new administration.
A couple of choice quotes from an e-mail Mr. Malpass sent today: "If the Fed buys more Treasuries without changing bank regulations, it will be pushing on a string from the standpoint of bank lending and will be flattening a yield curve that is already flooded with liquidity. The Fed is making $100 billion or so per year in profit, mostly on duration risk – that's a tax on the private sector, so adding to it won't be stimulative."
And: "Faulty Fed policy -- the dual mandate, 0% Fed funds rate, politicization, sprawling regulatory role, and disinterest in the value of the dollar as an indicator of monetary policy -- argues for a repetition of the Fed's track record of wild inflations and deflations, justifying hedges into gold and bonds. This harms the economy – capital is flowing to mines and bond issuers (mostly governments and big corporations) but not to small businesses or new hiring due to the uncertainty over taxes, regulation and inflation/deflation."
