- Jeremy Grantham and Nouriel Roubini are well known for their bearish views on the market and the economy.
- In a new PBS documentary about the Fed’s Decade of Cheap Money, Grantham and Roubini sound the alarm about stocks.
- These are the main quotes from Grantham and Roubini from the era of easy money.
Jeremy Grantham of GMO and economist Nouriel Roubini are well known for their ultra-bearish views on the stock market and the economy.
A new PBS Frontline documentary, The Age of Easy Money, chronicles the Federal Reserve’s monetary policy decisions over the past decade and explores the potential financial implications going forward.
Beginning in 2009, the Fed began a decade-long policy of providing the economy with cheap money, buying trillions of dollars worth of debt securities and keeping interest rates close to zero. But last year, the Fed dramatically changed its monetary policy, raising interest rates and reducing the size of its huge bond portfolio.
Both Grantham and Roubini offered their views on what the Fed did to the markets in the documentary and what could happen next.
Here are their top quotes:
1. Roubini to pay $1,400 in tax incentives in 2021.
“People like me, like Larry Summers and others, saw that this massive stimulus — it was unprecedented, an order of magnitude greater than what we had after  global financial crisis – will lead to rush demand, overheating and inflation,” Roubini said.
“We sent checks to help everyone—every family, every firm, every financial institution. It was too much and we should have been more selective.”
2. Roubini on central banks blowing bubbles
“We have literally had several decades of ever-increasing bubbles fueled and supported by central banks. And not only did we have bubbles, but we had bubbles that were fueled by excessive leverage, excessive private and public borrowing. and excessive risk,” Roubini said.
3. Roubini on central banks bursting bubbles
“The party is over. Inflation is high and rising. Central banks have to raise rates. It bursts asset bubbles. in a dream, and this dream in a bubble bursts and turns into an economic and financial nightmare, ”said Roubini.
4. Grantham on the Federal Reserve Helping Investors
“Over the years, we have been taught to believe that the Fed is on our side. The Fed taught us to believe that if we bet the market and win, we are on our own. make a profit. If we lose, they will use every effort and every dollar they can get their hands on one way or another to help us out. This is an asymmetry of the most magnificent kind,” Grantham said.
5. Grantham on speculation and euphoria marking the top of bubbles
“It’s a burst of euphoria that usually leads to an end… The housing market, the stock market and the bond market are all overpriced at the same time. If the Fed knew what it was doing, it would not have allowed bubbles, this amount should take place, ”said Grantham.
6. Grantham on the financialization of the economy
“During my career in America, the percentage of GDP that goes to finance has grown from 3.5% to 8.5%. In some ways, we are like giant bloodsuckers, and we have more than doubled in size and are sucking out more than twice as much. blood from the rest of the economy. And we don’t create any widgets. We are not generating any real revenue increase. We are just costs,” Grantham said.
Interviewer James Jacoby: “When you say ‘we’, do you mean that you and other members of the financial community were some kind of bloodsuckers in the economy? Is that what you mean?”
“Yes. Collectively, we provide a much needed service, but what we have done is create layers upon layers of more and more intricate and expensive financial instruments. to make it happen, and a lot of lobbying in Congress, and we have imposed on the rest of the economy the idea that banking and finance is extremely important at all times. If you do something bad to us, the whole economy will collapse in a ragged mess,” Grantham replied.