Cassandra of the crash: an interview with former Dallas Fed researcher Danielle DiMartino Booth.

• Author: Doherty, Brian
• Position: Federal Reserve Bank of Dallas - Interview

Danielle DiMartino Booth worked for nine eventful years at the Federal Reserve Bank of Dallas from 2006 to 2015 under Chairman and CEO Richard Fisher. Even prior to her Fed stint, as a columnist for the Dallas Morning News, Booth had written that "a huge amount of work will be required in the coming years to address the fallout of the largest financial bubble in history... far beyond the realm of residential real estate."

She writes about her experiences in the new book Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America (Portfolio/Penguin). Senior Editor Brian Doherty interviewed Booth by phone shortly after the Fed announced in March its third interest rate target hike since 2006.

Q: Is the Fed on track to interest rate sanity now?

A: It's too little, too late. [Federal Reserve Chair] Janet Yellen continues to be drawn to her academic roots as a labor economist, and wants to keep rates lower for longer [because she hopes it will] bring marginal workers off the sidelines. But the price is what we are giving up in tomorrow's financial instability.

Q: Do you think Fed policy might have influenced the past few years' stock market run-up?

A: Might? You can connect the dots. With the lowest interest rates in 5,000 years, you have companies borrowing to buy back shares and have earnings per share go up. It's mathematical. Thank you, Fed! Yet what have they done in creating anything of lasting economic sustained growth? Look at productivity growth, and you'll see it's a whole lot of nothing. I'm not casting stones [at the companies whose stock price is going up]. They are behaving rationally in a world where central bankers are behaving irrationally.

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Q: Is propping up Wall Street at the expense of Main Street a meaningful way to critique the past decade of Fed policy?

A: Check the average yield on a certificate of deposit [and it's clear normal savers, who don't want to play the stock market, are in trouble]. Even if you take the garbled inflation metric the Fed uses that doesn't apply to anything on planet Earth, core CPI [Consumer Price Index, which doesn't count things like energy and food that most Americans spend a lot on], you see Main Street cannot be prudent in...