Why Optimists Don't Understand This Market: Kumar

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June 19 (Bloomberg) -- Sri Kumar, founder and president at Sri-Kumar Global Strategies, discusses the need for a change to the Federal Reserve’s approach to boosting U.S. growth, using structural reforms to create employment and the economic danger he sees from multiple expanding bubbles. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

Expect the monetary growth, quantitative easing, will produce economic growth at her rapid pace.

Sometimes when you take a medication and it hasn't worked for five years, you better change her medication.

But that is essentially the error with the optimists.

That had five years of big bond purchases, and we don't have sustainable economic growth.

They haven't changed it.

In your great interview with christine lagarde of the imf, for instance, she said she looks are slower growth later this year but not a downward spiral.

The question then is, what we have had is a spiral for five years of not picking up, why not admit it?

Why not say you need a different medication?

Equivocal distinction, the idea that suits and ties and fancy dresses can actually change the job market worldwide through monetary policy for mature fancy economics.

There is no evidence of that, is there?

There are two problems with it.

One, you started out with zero interest rate in 2008 and we have that again and again that monetary policy is ineffective at very interest -- low interest rate levels.

The second problem, unemployment is becoming structural.

It is long-term unemployment getting more important and that means you cannot essentially -- janet yellen has been very overt about the structural versus cyclical issues.

But she might be a little powerless here.

You said they'd need to make it next was objective, but is cap it done without structural.

With a midterm election year.

What kind of short-term fixes are on the table?

I don't think there are any short-term fixes, especially after five years of not done much.

I go one step further beyond fiscal policy.

If you're saying to spend more money and that will create jobs, that isn't going to happen because we tried doing it in 2009 and 2010. what needs to be done is very much the german model from 2003, emphasize vocational training, educate workers, attach high school students to potential employers, an increase employment when they come out of high school.

Nothing to do with monetary policy or fiscal policy.

These are structural reforms and reforms in the labor market.

Germany did it and succeeded.

France has not and they are suffering-implement.

They say, spend whatever you have to do for that.

Would you agree?

I totally disagree.


I disagree with the paul krugman view.

You would want to spend more money to keep increasing the deficit from the levels they are at.

The emphasis is more in terms of actually focusing on employment, which i don't think he favors because i think he believes it helps the employers, the fatcats.

You essentially have to change the approach, and that is where i think i would differ from it.

If you're going to be spending, spending in the direction of creating jobs not overall fiscal to visit increase, which i think is more of the paul krugman point of view.

Are you a pessimist or someone cautious looking for a better time ahead, or is the new neutral going to be a subdued euro sclerosis that we have to get used to?

That is a good question.

I don't think we are destined to be a new normal forever.

You don't have a defeatist attitude.

Not at all.

The structural change that will come is fracking, more energy, and that will be positive change.

Not because of anything we did.

It is essentially because of the opportunity to month -- the opportunity market presents to us.

If you do have the training we are talking about, that in turn is going to be very positive for job creation as well.

This is why you need not just emphasize fiscal expansion, but specifically how each act is going to help in terms of jobs.

We're focusing on what the fed should be doing.

Given what they are doing, what does that mean for stocks and bonds and corporate bonds over the next year?

We talked about bubbles and you talked about various bubbles, scarlet.

I think the bubbles are going to get bigger.

As one famous x ceo of a new york bank said, the music is on, the players are dancing -- sri kumar quoting charles prince.

I did not name him, but yes.


When you have that, the music will stop.

The question is, you don't know when it is going to stop.

Adam and i have had time to talk about what it does equities over the last year.

I think the danger continues to be present.

The danger is increased because the bubble is seen in high yield bonds.

That is a huge bubble.

What a primitive get to our twitter question.


Is yellen's low rates for longer policy creating more bubbles?

You just heard sri kumar give his view.

This text has been automatically generated. It may not be 100% accurate.


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