David Stockman, budget director of former U.S. President Ronald Reagan, appeared on FoxTV last week and said that the Fed's expansionary policy is again leading to the inflation of asset prices, similar to what occurred prior to the Great Recession. Stockman said that “It's 2007-2008 all over again”, adding different statistics to support this premise. For instance, Stockman noted that the Small Cap Russel 2,000 index went up 43% during the recent year, while the earnings of the firms in it did not increased, and that junk bond issuances are far greater now than they were in 2007. When confronted with the claim that major aggregates are only 15-16 times earnings to equity Stockman replied that bubbles don't form in the heart of the Dow, but rather out on the specular periphery, giving the real estate as an example for speculative assets.
More QE talks came from a nontrivial source, the former Governor Candidate Larry Summers. In a Bloomberg interview, Summers initially supported the easing by noting: “on the question on whether the Fed stepping up and providing liquidity when no one else would was the right thing to do? I think historians are going to judge that about 98 to 2”. On the other hand, Summers also advocated the use of fiscal rather than monetary actions such as in fixing Kennedy Airport “which is in a shambles”, or "doing something about 25,000 schools across the country, where paint is chipping off the walls".
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