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Moody's Chief Economist John Lonski and Euro Pacific CEO Peter Schiff weigh in on the future of the global and U.S. markets.
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Thanks very much.
For more on the markets abroad and what we can expect on Wall Street this coming week we're joined now by Euro Pacific CO.
Chief global strategist Peter -- Peter good to have you with us.
Peter is the author of the book -- on economy.
-- I have crashes.
Joining us and our studios here in New York City -- chief economist John -- John good to have you with us let's let's start with that that report coming out of Japan that's better.
News than we had expected that's decent news in what that is telling us is that perhaps this loss of output to Japanese earthquake.
Is not going to but the service that well as an excuse for weak economic -- Activity the United States -- Japan is doing better than expected and we can't point to the earthquake and say that's a source of our problem.
It would it's also reminding us that Asia's economies are still grow growing quite briskly especially in the case of China.
And and your take from -- Peter.
While for flooding the real story in Japan is how much good money is the Japanese government gonna -- after bad.
In trying to -- the US dollar and propping it up you know the stock market gets all the headlines but I think the real markets that we need to watch.
The foreign exchange markets and the bond market because the Fed can always prop up the stock market -- -- money at least nominally.
But if we get as a crack in the dollar crack in the bond market that's really the beginning of the and I think that's happening right now and the Bank of Japan is trying to fight this.
Other foreign central banks are trying to prop of the dollar but I think ultimately they're going to be overwhelmed by selling.
Even is is the Nikkei is rising one and a half percent I mean that's that was for the most part beyond.
Any expectation or even the most positive.
The economists in the consensus.
Weren't that aggressive.
John that would be right if that's true and this is a surprisingly good news from Japan we've got -- -- heartened by the response of the Japanese stock market.
And perhaps if Europe does better.
Later today would take it off on the right foot.
-- that could bode well for the opening session on Wall Street and we need.
Some positive momentum in order to avoid the -- to bad -- that we just went through.
Well no one is more -- more positive leadership Peter is that what you're expecting tomorrow.
Well you know the problem frost is if you're guess is that together in other one thing that's holding up the dollars fears over the Euro.
But I think that there's so much real pressure now on France on on Italy on Spain actually cut government spending.
Because they can't print euros and there's real pressure on -- I think they're gonna do it.
And when they do it's gonna put the spotlight right on the buyback on the dollar because we are doing nothing to stop our deficits we're relying on the fact that we can print money to -- do nothing.
But it's the fact that we can print money that makes our financial lasted so risky both the dollar in the bond market who do you think will be printing in Europe.
Well nobody's -- well the if they can't all the countries France or Italy or Germany they can't print euros.
Let's let -- how to do that yes I understand.
But I doubt I heard you say that they're going to be doing that.
Now here I mean are is it that you're doing -- now though.
Yeah we're not cutting back on anything the world is giving -- a lot of rope and we're hanging ourselves with -- other countries have to make that tough choices we don't.
Here think legally I don't understand and Peter Bergen rigorous good job.
I is we listened to Peter Reid is in this seems to be an chancellor cognitive dissonance at work here.
This is a president who's had to retreat from spending trillions of dollars in his 2012 budget over the course of the next decade.
This is a congress -- tend to focus on how to constrained spend.
This is a public.
That just about three fourths of -- Want our budget brought under control.
This looks to -- to be a tectonic shift.
In in direction potential change in direction.
A for this country and we're talking and in some ways behaving as if it's you know and up and out of this is transpire.
Yeah it's a -- I have all of -- -- fiscal austerity going forward not only.
At the federal level but state and local governments as well this is gonna put more downward pressure on interest rates as we move into the future.
You you know without any indication of QE3 on it so long the ten year treasury yield has something to at a quarter percent it might in in May yet move even lower and.
It hasn't done guns don't it's not a lot of help from the fact is that a lot of help from foreign central banks why do you think rates -- -- -- and -- -- because we have no inflation.
Mean we have plenty of inflation all you have -- -- price deflation in housing that you still have to look at into account that let me now with a well how does the recent past as we cannot ignore asset price inflation are deeply -- Housing prices are falling but the cost of owning a home is going not -- -- insurance taxes mean prices are rising.
Assets going down that's not that's not deflation we've got a rise in the cost of living -- -- got to spend more money you made back in 2000.
And all three of 2004 the ignored real estate price inflation and paid a heavy price for having done so by no I don't either and and you know I mean Moody's might -- -- the there's this sub prime crisis I -- I got that right.
-- -- I understand that that there there is a lot of in.
Later there was if it was very talented leaders there.
And noble I thought there there.
To do that.
Let's let's talk about a couple of inflationary first one we're looking at crude oil at 85 dollars we're watching energy prices declined not rise.
We're looking at housing that is interest -- -- -- twelve year lows here.
We're watching this inflation at the very least there seems to me at least to be the prospect of deflation.
At hand despite the injection of trillions of dollars into this financial system.
That seems to me to be don't worrying not something we should ignore.
Lou don't confuse falling asset prices with deflation are not getting a Denny's surprised I was there -- -- disinflation man it's a silly -- -- but it's not having the money -- expanding look at the price of gold gold would be 67 dollars an ounce if we're gonna have inflation the Fed isn't for inflating like Matt.
Oil prices wouldn't be 85 dollars a barrel if there was an inflation look at food prices and we don't think -- I don't -- be Peter you know we are what you don't know and absolutely horrific predictor of price inflation over the past twenty years now thirty years there is ever done a good job.
If you don't.
We've had hold of soaring ever since.
2001.
More -- less it yet we find.
That these measures of price inflation that you were criticized.
That -- -- these measures of -- price inflation that you're citing I have been well contained CPI already it that easy that price index cover.
I think we're getting government fear -- them in Iraq if if -- -- I think we can agree.
On this I would hope.
You John myself others that we have not seen anything like the hyper inflation.
That was anticipated as a result of the -- treasury and the Fed's policy -- hi -- -- hyper inflation is a whole different ball game but.
We are getting way to place just adjusts for a whole lot just for quality and are you hold on just find you respond to my question in there -- with your.
No we haven't hi I'm hoping we avoid hyper inflation but.
We're gonna have high inflation but if you measured inflation -- -- -- -- -- CPI as we have in the 1970s.
We're dealing with almost 10% inflation right now John we have a the last time I received -- all eyes were -- -- is lying about inflation.
People Weimar republic will have to wait life will not be a -- anytime soon.
And I think this obsession with inflation that some of the markets have it's totally.
Well overdone exaggerated the war He is we don't have enough of real economic growth or not we have put up jobs who care about inflation at this point oh not bad does it make any Deborah gonna make it worse is 2% or 4%.
Not.
And it enabled.
And part of people are worried enough about inflation and generally I don't have a high unemployment and other John's point which is the point of this broadcast in fact.
The focus of this network.
And that is prosperity.
The returned to growth creation of jobs 25 million Americans right now are suffering.
And in deep pain Peter and and the -- you know the rather arcane discussion of whether or any real inflation is that 3.5.
Percent or.
Eight point nine is really irrelevant even to the policy.
Bought politics not a relevant to people who are struggling to make ends meet everybody there are real wages my friend like my different us if there has to be a time at some point.
We start talking in the aggregate and in.
The total.
Of this economy.
If we can we can bounce from sector to sector element to element.
But we really have to -- focusing it seems to me much as our policy makers -- refused to do on restoring this country to prosperity.
And by the word out -- -- of that discussion.
Alright tradeoffs -- and do an intelligent job of making such -- -- -- right and I lied Johnston didn't get the last word leadership you did as.
I invite you double there were banks bidders thanks have been -- -- --
