Time for Fed to Normalize Rates: LPL's White

The U.S. currently has a savings glut, according to the CIO. The glut is a direct result of the fact that investors have felt they have to put away more money, since they cannot rely on interest income given today’s low rates.

“There’s been no spending since about 2010, and that’s kept us from realizing our potential,” he stated.

Median annual income levels in the U.S. stand at around $53,600, having moved very little in recent decades. Meanwhile, the cost of college, rent, child care, health care and food have gone “up, up and up,” White says. (Other less-essential items like toys and TVs have fallen.) “So people are taking on debt,” he said.

GDP growth is roughly 2% and should be at 3%. To close the gap, businesses “need to update their machinery,” for instance, and hire more workers, according to the CIO. That should produce some growth in wages, “and nothing tells the Fed to [raise rates] more than wage growth.”

“We need wage increases to boost consumer confidence, and the Fed needs to raise rates,” he added.

“Potential is the most overused and least-understood word,” White explained, pointing to some motivational posters with kittens and other animals.

“As I get more mature, I have come to see the real, key potential is different from simple ‘poster wisdom,’” he said. “The question of whether or not we are living up to our potential misses the point — as does the [analogy of] the acorn growing into a big oak tree. The true potential is to create other trees and build a forest of influence.”