Federal Reserve Board Chair Janet Yellen. (Photo: AP)

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.”

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.”