Daniel Lacalle

The Federal Reserve does not create a downturn due to rate hikes; it may create the foundations of a crisis by unnecessarily lowering rates to negative territory and aggressively increasing its balance sheet. A recession is caused by underinvestment and excessive risk-taking, which are usually fueled by cheap money. Valuations soar simply because the quantity of money is rising faster than nominal GDP (gross domestic product). Daniel Lacalle, author of "Escape from the Central Bank Trap," explains how monetary policy can be conducted while avoiding excessive risk-taking and the creation of bubbles.