On the off chance anyone is taking their macro cues from Carl Icahn these days, CNBC indulged their obsession with collecting soundbites from the biggest names they can find on Thursday, hosting Carl for a midday chat.
Perhaps not surprisingly, Icahn isn’t convinced that the world’s problems can be solved simply by the Fed cutting rates.
“I don’t think just lowering rates is the answer”, he mused. “If it were that easy, you’d never have these cycles”.
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That’s true, although it’s not clear we needed to hear that from Icahn and besides, it is possible to prolong expansions with preventative rate cuts. There’s no question about that. Whether or not that’s advisable to the extent it risks blowing bubbles and preventing creative destruction from purging misallocated capital is another story. Don’t forget “zombie dynamics“.
In any case, Icahn continued. “There’s an argument for cutting rates, but you look at Europe and they cut their cuts to negative, and look at their economy, so I don’t think that’s the final answer to the problem”, he said.
That’s just a reiteration of the derisive “Japanification” label that’s been seared into the eurozone’s forehead thanks to relatively anemic growth and inflation amid negative rates and years of ultra-accommodative monetary policy.
Of course, Icahn might want to let his friend Donald Trump (the self-declared “king of debt”) in on the whole “lower rates won’t solve all our problems” truism, because the president pretty clearly believes that an aggressive easing cycle from the Fed is all America needs to finally be “great again”.
There’s a very plausible argument that says round after round of competitive easing and a misguided approach to inflation targeting in a world where all central banks are chasing down the same rabbit hole will not, in fact, produce the desired economic outcomes. Throw in the laundry list of structural factors weighing on inflation and it’s pretty obvious that an entirely new approach is in order.
As you can see from the clip, CNBC’s Scott Wapner attempted to get Icahn to say he doesn’t agree with Trump, Larry Kudlow and Peter Navarro on the Fed, but Carl insisted he didn’t want to “get into politics” (try to keep from laughing).
Asked about China, Icahn again demurred on the political angle, but noted that “I really hope they’d make a deal and get that settled sooner than later”.
Talk to Peter Navarro about that, Carl.