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Bernanke's Next Move

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  • Description

    Merk Investments CIO Axel Merk gives his outlook for the Fed.

  • Duration 3:16
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Be watching as we talked about the Fed Chairman Ben Bernanke testifying before congress tomorrow thinking about what will they do next and our next guest says well he already knows which -- -- Was nice to have that information at a time.

Axel -- president CIO at a -- investments joins us on markets now and what can the federal resume reserve do you Axel at this point.

News good money went what we do ways we look at the playbook anybody is encouraged to once a month to Google.

-- -- -- helicopter speech and global we'll take you not to some offbeat side but to the Federal Reserve website to Bernanke's 2002 speech.

When he lays out the types of things that can be done.

Now -- the most simple thing of course because duty could eliminate -- interest that are coming paid -- -- Israel but but I think the more likely thing to happen is.

And remember those LT I was in Europe while they might be coming -- the US and specifically.

Bank of America for example as a whole bunch of -- -- backed securities on the on their books but wouldn't it be great to exchange those -- cash.

And so what you can do is you can have a facility where you swap those for cash because everybody quantitative easing -- it.

Because everybody says and it's is -- is -- to hear about some of the specifics because the general conversation I -- the Dow's.

Crazy about all this today and were up 170 which is great that the general conversation is hey listen we're in an environment where interest rates which is the main.

Vehicle that the Federal Reserve.

Has had its disposal interest rates are already at record lows and Europe essentially is doing our bidding for us and keeping those rates at record lows so even way decent pick -- moves what would be the effect dubbed them.

From Bernanke and company if they are -- -- going up.

Did exactly and if it makes it makes little sense to buy more bonds but what you can do is you can have these facilities and the difference is that demand driven and bank than once cash can get it.

And -- ten can offload at least temporarily help but those adjust them financing facilities and a temporary ones.

And and and can exchange them for cash and so -- demand driven system that's more that's it.

More easily going to increase the velocity of minus ninety more easily actually -- economic growth.

Different -- the -- doing right now -- -- boatload of securities doesn't quite know what to do with it doesn't quite know what the impact is there was going to be what targeted the most specific stimulus.

By having these sort of facilities that that provide cash -- return -- fall off loading some potentially illiquid securities and the net short term effect of that -- here in the camp that the short term effect of that outweighs the long term risk essentially of you know it's everybody's it -- says that it can the Federal Reserve does at some point we have to pay for all of us.

I think it's a horrible strategy -- yacht to me what the Fed will do and a look at should do.

I think this is going to weaken the dollar I think this is not going to fix the underlying issues but just patching up the prompt.

Remember about we we think we don't have a European crisis we have a global crisis what just happened to cover them up with a low interest rates in business -- gonna extend that.

We are not forced to address how issues like they do in Europe but this is what the Fed will do and eventually what's what's happening in Europe comes here it happens here.

And in different -- but austerity just doesn't work very well in in democracies we just don't like those sort of things we don't like to fix our problems and when we can print money.

And the difference and we saw this morning there was an ECB press conference the European Central Bank press conference -- -- the opinion that police are trying to solve the problems and we're just printing money to get a little problems Axel thank you.

As always we appreciate it Axel mark thanks for coming up.

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