Prospective Fed nominee Shelton says global economy in ‘very dangerous situation’ like 1930s
- Judy Shelton, who is President Donald Trump’s likely nominee to the Federal Reserve board, warned Thursday about the dangers of central bank actions.
- Rate cuts these days are being used simply to devalue currencies and hurt other countries as opposed to promoting growth, she said in a CNBC interview.
- She compared the policies to “beggar-thy-neighbor” actions taken during the Great Depression in the 1930s and said the global economy is “in a very dangerous situation.”
Likely Federal Reserve nominee Judy Shelton compared the current situation involving the U.S. central bank and its global counterparts to the 1930s as the world struggled through the Great Depression.
Shelton referred to the central banks lowering rates and devaluing their respective currencies to undercut competitors. The Fed lowered its benchmark interest rate by a quarter percentage point Wednesday, and others, including the European Central Bank and Bank of Japan, have stated their intentions to loosen monetary policy as well.
Monetary policy nowadays is “not causing any growth to be stimulated but it is having an effect in currency markets, and we’re in a very dangerous situation,” Shelton told CNBC’s Rick Santelli during a “Squawk on the Street” interview. “It’s not unlike the 1930s when you had beggar-thy-neighbor competitive depreciations.”
President Donald Trump has stated his intention to nominate Shelton for a Federal Reserve governor’s position.
Latest IMF Remarks on a Global Recession
- The trade war is contributing to a global economic slowdown, the IMF’s David Lipton says.
- “It’s time for the countries to have dialogue, to reach agreements, to try to find a way through this,” he says.
- Lipton says if a global recession were to start, central banks would be in weakened positions to fight it due to easy monetary policies.
Acting IMF Managing Director David Lipton, in a veiled appeal Thursday on CNBC, called on the U.S. and China to come to an agreement and end their yearlong trade war.
Lipton told “Squawk on the Street ” that the global economic slowdown has been “certainly affected by the trade tensions,” though he did not mention the U.S. or China by name.
The latest round of trade talks between the world’s two biggest economies on Tuesday and Wednesday in Shanghai made little progress. Negotiations are set to resume in September in Washington.
Tensions between the White House and Chinese technology giants may also be contributing to the global economic slowdown, Lipton said.
“It’s time for the countries to have dialogue, to reach agreements, to try to find a way through this, since the global economy is fragile,” he said.