It's been another topsy-turvy day for Wall Street. The Dow (DJI) has now dropped more than 500-points since Fed Chair Ben Bernanke's news conference last week, in which he hinted strongly that the Fed is eager to start "tapering" and that the day is relatively close at hand.
Bill Cohan, former investment banker and author of "Money and Power: How Goldman Sachs Came to Rule the World," tells The Daily Ticker it's about time the Fed backed off. "I think the market is clearly overreacting to what Bernanke said, his actual words, which were frankly quite ambiguous, but is beginning to get the sense that, okay, this gravy train is coming to an end and I better come to grips with that."
Cohan points out that interest rates are still historically low and says the Fed has effectively created a bond market bubble over the last couple years. In that vein, he compares the Fed to a drug dealer, and says Wall Street investors are the addicts. "Ultimately if you want to get clean, if you want to be healthy, if you want to wean yourself from this addiction of low interest rates, that have been kept artificially low by Bernanke, there's gonna be some pain involved... Ultimately, it's going to be a very positive thing for capital markets."
Watch the video above to see why Cohan thinks The New York Times columnist and Nobel Prize-winning economist Paul Krugman is off in "some sort of fantasy land."
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