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FTN Financial Chief Economist Chris Low on what happens if the debt ceiling isn't raised and the U.S. AAA credit rating is downgraded by Moody's.
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In the US on watch our next guest says things are starting to get ugly the chief economist thrifty and financial Chris slowed joins us -- just heard from -- -- Moody's.
Is going to act if if if the US doesn't -- Stetson leave the US as he gets long term fiscal house in order.
What does that mean I mean does it mean August 2 August 3 rates instantly start moving up.
The demand for treasuries starts to back off has been so high even through all this economic turmoil that we've had you what does that mean -- -- -- Okay that they're talking about two things here right they're talking about the possibility of default if there's a default and interest payment is missed then that would be an automatic downgrade.
They're also talking about this possibility of if we don't make credible action to reduce the deficit even if we do meet the deadline.
Bill think about it down Clinton in that case it wouldn't be from AAA rated junk or something like that we would be -- downgraded double A we've seen that before we just saw it actually a couple of years ago and Japan.
And it had very little market impact double -- is still.
A solid credit rating so.
Is there are there other our economic implications we get to this -- Ended its full size is seen to be so and -- right now we might get there -- not have a deal.
And you talk about the economic replicate implications whether it's from.
The agencies and that effect on rates what are some of the other things that we might see might happen come that data -- that week that might change the economic picture on.
What what one of the things that makes this so one predictable is also one of the things that that.
Improves the picture for the US and that is the problems that are going on in Europe to.
The reason for that is that the risks are extraordinarily high over there we're seeing a lot of our customers who were heavily invested in Europe moving into the United States now.
Not as a result if there is.
We were we hit the deadline there's a -- coupon payment the US is technically in default.
The question is do you selling go where.
In if there's nowhere to go and everyone sits pat.
Then it's not necessarily as calamitous is Bernanke makes about to be no I'm not saying that we should give it a shot and see what happens.
But if it -- there is that possibility and we're starting to hear from more and more analysts.
That that might in fact be the upshot that they have a couple of weeks even after -- miss.
To get it back together.
I wall we're talking about the debt ceiling and what's going on NBC we do continue to get the economic data coming in.
Weekly jobs reports say a little bit better then and what it has -- -- as the best number we've seen in a couple of months ago is still over 400000.
We got some inflation numbers today.
As well we got some some also some sales numbers today -- well what do you make of this economic data we got a little disappointing may be.
Still soft patch and I think that's the important thing watch out for the claims it was the fourth of July weakening -- really hard time seasonally adjusting holidays though it was down but.
I'm gonna wait and see what happens next week the retail sales.
We're a little bit better than expected but only because car prices are a lot and you don't -- -- see inflation so that's really not all that good either.
The bottom line you look at all the numbers together we are still mired in this sideways economy we're not bouncing back yet.
Ben Bernanke -- -- we talked about what -- set over the last couple days he's got a pretty optimistic even though he's the kind of left the door open a little bit from more easing.
I think he's innocent it to -- it sounded like he was saying look I still see.
The clouds lifting on the horizon if they don't we have things we can do that -- on a pretty optimistic yeah I think.
One of the hardest -- -- hit the economy in the last three months this inflation we had a really rapid run up in food and energy prices in it hurt a lot.
Right now and for the last two months they've been going sideways so we're not getting relief.
But if you put together a year's worth of energy prices that unchanged that 0% energy inflation -- you can sort of grow into it as long as you have income growth which we do it's not rapid but we have a little bit.
And that I think is what brings you back to decent GDP growth in the second half of the year the problem is.
It's not happening in the third quarter yet so we -- we we gave up the second quarter were already the first quarter was under two and now it looks like the third quarters undertow.
Bomb Chris if we're all still around after August 2 we'll have you back alright Tom -- vacations get disinterested to be here -- -- -- -- -- while president Dell model works hard at his job others are busy working to take his job.
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