Howard Marks, co-founder of Oaktree Capital Group has emerged as one of the few voices to criticize the Fed for cutting interest rates last month, according to Bloomberg. Marks believes that more monetary stimulus will simply boost asset prices further, which will just serve to widen the income inequality gap.
To which, we respond: Marks is spot on.
Sure, it’s a relatively simple concept, but then again so is not racking up $22 trillion in debt and catalyzing debt bubbles that, depending on sector, are approaching or have already eclipsed levels seen before the 2008 Great Recession.
Marks opens his latest memo to clients, dated July 26, asking, “…is it the Fed’s job to sustain expansions and keep market dislocations at bay ad infinitum?”
With the bull market now passing a decade-long with record low unemployment, Marks says the economy simply doesn’t need the Fed’s help. He argues that the rate cut last week will make it harder for people with less savings, and also lenders, to earn decent returns.
“The process of lowering the rates causes assets to inflate. There will be more wealth piled up by the people who have assets and it’ll be harder for people who just have a little bit of savings to make a return.”
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