David Malpass, the former chief economist of Bear Stearns, says that the dollar, not high oil prices, is the real problem with the U.S. economy.
Malpass blames former Federal Reserve Board Chairman Alan Greenspan for starting the current easy money policy in Washington that Malpass says is responsible for the problems that companies and consumers are facing today.
"Banks lost a lot of money, but that hasn't stopped the global community. And I don't think it will," says Malpass, now senior economist at Encima Global.
"The dollar is strengthening, that's good news. But, 1 percent interest rates didn't make sense. We built a bubble," said Malpass, referring to unusually low interest rates under Greenspan.
"The problem is that the dollar has been flat on its back. That causes inflation and oil prices to be high, and makes Russia a strong global power. They keep gaining profits and wealth at our expense."
Malpass told Bloomberg Television that the Fed still hasn't completely changed its "dovish" policy. As a consequence, "we face significant hurdles" in the coming months.
Malpass says he, and other economists, have learned many lessons during the last year.
"I've not been shaken in the idea that the global economy is a pretty stable system. It was faced with a strong shock to the system. A hurricane if you will, a financial hurricane."
He is worried, however, that the interventions that Washington made in the economy, propping up Bear Stearns, for example, when it "got caught up in a violent run," will continue.
"Washington is constantly expanding. It has one of the fastest growing residential communities in the U.S. because they (the government) expand their powers in all areas," he says.
"The Fed is just one of the agencies. The Constitution did not set up checks and balances to check the Fed. The Fed is newer than that. It's hard to know where they will stop."
source: Malpass: Russia Gains at Our Expense