Fed's Kaplan Warns Trump "US Too Levered To Use Debt For Growth"

Federal Reserve Bank of Dallas President Robert Kaplan had lots to say this morning that, for now, the market has chosen to ignore. He warned "we are highly leveraged" implicitly warning President Trump that the country’s ability to boost growth through debt is limited.  

Speaking in Fort Worth, Texas, Kaplan said today that general measures of unemployment in the U.S. indicate that there is still slack in the labor market, although it's abating, Reuters reports.

He added:

  • *FED'S KAPLAN SEES U.S. GDP GROWTH IN EXCESS OF 2% IN 2017
  • *FED'S KAPLAN: UNEMPLOYMENT RATE CAN GO LOWER THAN 4.5%
  • *FED'S KAPLAN: LABOR MARKET GENERALLY IS GETTING TIGHTER
  • *KAPLAN: ECONOMY NOT RUNNING AWAY, FED CAN AFFORD TO BE GRADUAL
  • *KAPLAN: U.S. CONSUMER PROVIDING GOOD UNDERPINNING FOR ECONOMY

Kaplan also noted that the Fed balance sheet may be cut by year-end...

“I’m not going to get into the pause, no pause. I think it’s more appropriate to talk about the path of rates”

 

“The objective and the initiative to let the balance sheet run off does not alter my views as to what the path of rates should be” for 2017 or 2018

  • *KAPLAN: FED CAN BEGIN SHRINKING BALANCE SHEET LATER THIS YEAR
  • *FED'S KAPLAN: B/SHEET RUN-OFF TO HAVE SOME TIGHTENING IMPACT
  • *KAPLAN SAYS IMPORTANT FED'S BALANCE-SHEET SHRINK IS PREDICTABLE
  • *KAPLAN: FED CAN SHRINK B/SHEET IN A MANAGEABLE WAY
  • *FED'S KAPLAN: GOAL TO SHRINK B/SHEET WITHOUT MAJOR MKT EFECT

Well it's good to have goals, right? Good luck with this... 

Then he began his fiscal policy admonition...

  • *KAPLAN: U.S. DEBT TO BECOME BIGGER ISSUE AS RATES NORMALIZE
  • *KAPLAN: U.S. IS HIGHLY LEVERAGED, CAN'T USE DEBT TO BOOST GDP

It appears Mr. Kaplan was fine with President Obama's doubling of the national debt as The Fed held rates at zero during his term?

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