'Aggressively' hold gold & real estate as Fed's QE is a 'failed experiment,' says Danielle DiMartino Booth
(Kitco News) The Federal Reserve has kept its monetary policy "inappropriately" too easy for too long, triggering inflation. And now the central bank could be forced to tighten aggressively, said Danielle DiMartino Booth, CEO of Quill Intelligence.
"Quantitative easing is a failed experiment," Booth told Michelle Makori, editor-in-chief of Kitco News. "We have much more going on here than supply chain disruptions. And there are much more problematic forms of inflation that I don't think [Fed Chair] Jerome Powell is prepared to acknowledge. But it is the sticky type of inflation that the Fed has to be most concerned with. And that is beginning to bleed through into housing and rental inflation."
With so much liquidity added to the monetary system, DiMartino Booth pointed out that the Fed is stuck between a rock and a hard place.
"I don't think the Fed has much of a choice," she said. "I don't think most people inside the Fed believe in the transitory narrative anymore. Most Fed officials at this point have acknowledged that there's something much more persistent about this. And, the Fed's idea that they're going to let inflation run hot. I don't think they ever anticipated that it was going to run hot for this long."
And with higher-than-expected inflation and slower growth, Fed's options are quite limited, DiMartino Booth added. Raising rates could slow the economy down, while keeping rates too low could trigger sticky inflation.
"They're boxed in because the economy is already slowing. They either tighten, or they don't. Both are policy errors. We had a flash recession. It lasted all of two months. So they've kept policy inappropriately too easy for much too long," she stated.
Giving trillions of dollars directly to households is what really hyper-charged inflation over the last 19 months.
"What distinguishes the great financial crisis is that the Fed was able to go at it alone in 2009, 2010, 2011. This time, they needed fiscal money as well. And we're heading into midterm elections. And I think Washington's dysfunctionality is on full display. And there's certainly no reason the GOP would want to help the economy headed into 2022 and the November midterm elections. So the Fed might not be able to go at it alone if the economy does slow."
Based on the current economic environment, the Fed could be forced into tightening, including raising interest rates.
In light of all of this, DiMartino Booth advises holding gold, real estate, and municipal bonds. "I am aggressively holding onto my gold. I do like the fact that I have a lot of real estate. And my municipal bonds have treated me very well," she said.
Watch the video above to learn more about the impact of the upcoming Fed's tapering and whether or not Fed Chair Jerome Powell has a chance at renomination. Follow Michelle Makori on Twitter: @MichelleMakori.