Burt White, chief investment officer of LPL Financial (LPLA), says it time for the Federal Reserve to change the way its tending to the health of the U.S. economy.
“The Fed must normalize interest rates, or we can’t get checked out of the hospital,” said White, speaking to some 3,500 advisors and their staff (and over 2,500 other guests) at the firm’s annual conference on Tuesday.
“We are now at a zero fed Funds rate, and the Fed is not letting us out of the hospital,” the CIO explained. “There’s the interest we pay and the interest we receive. Both are critical, and low rates are not always good.”
The low rates are keeping the U.S. economy from realizing its potential, he says, due to the dynamics that link monetary policy, personal income and debt.
“One poll finds that 48% of Americans say the American Dream is no longer alive … and 44% worry about the future of the country for our kids,” White explained. “There are scary, daunting tasks ahead of us. This is your client. This is us!”
The CIO described the unusually low recovery that followed the financial crisis: “We did not get to growth [of 3% or higher], and that means that we have the under-potential of the economy” of around $365 billion.
“That’s what the GDP is for the state of Minnesota. That’s our under-potential,” he said during the San Diego-based event.
Low interest rates, White says, “hurt us two times more than they help us.”