After a morning of panels at the Milken Institute Global Conference, what stands out to me most is Griffin's take on the Fed's current policies.
There's a lot of worry that the central bank's actions could be inflating asset bubbles. But that's not what has Griffin worried. Instead, he fears that the zero interest rate target and quantitative easing may be backfiring, causing businesses to reduce employment rather than adding jobs.
According to Griffin, low interest rates have encouraged businesses to invest in technology that reduces the demand for human labor. Meanwhile, health care reforms have increased the cost of human capital—so it's a double whammy.
"As we've all learned over the years, if you reduce the cost of capital you increase your use of fixed assets and you take out jobs. Corporate America, seeing an ever increasing cost for its employee base and extraordinarily low interest rates, is taking every step it can possibly take to reduce employment, to build factories abroad and domestically to substitute technology and automated processes for people," Griffin said.
That's pretty far from standard economic thinking, for sure. But it at least tells a coherent story about why the massive increase in the Fed's balance sheet hasn't been more effective and putting us on a healthier economic path.
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