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Wells Fargo Chief Economist John Silvia and Beacon Economics founding partner Chris Thornberg on the outlook for the economy and the impact of the hea...
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Mixed US economic data hitting the markets this week and now the supreme court of course upholding the health care mandate as a tax.
So can the US avoid a recession.
Time first street fight for the Wall Street dot Chris the work -- beacon economics founding partner and for the bears.
We have John Silvia Wells Fargo chief economist.
OK let me start with Chris because as a -- there are a lot of headwinds that everybody's talking about right now as far as we possibly dipping into another recession you say no.
But how are we going to absorb all that's happening plus a GDP number -- came out this morning at just kind of a measly one point 9% to.
Hello everybody -- suddenly -- mind.
Bob is a big difference between -- the economy that's not growing as fast as we like say 2% -- and -- half percent vs an economy that's actually contracting.
-- economies start contracting we have to have some large rapid and sustained shock at this point in time I don't see where that shock would actually emerge from.
Yes export growth is weakening there's no doubt about that but it hasn't fought off a cliff.
Of course right now we're getting additional boost from both the housing market the fact that that we have a commodity prices falling not offset some of that export weakness.
Really you want the eye can see outfits of a potential risk of driving US economy into recession.
Is -- the government really does nothing about this fiscal cliff we're facing a January 1 if they would actually allow that to occur.
That will push a -- recession but otherwise I don't see what's coming from.
Alright John let's talk about the health care decision and in particular.
The fact that everybody fessed up and says it's now attacks of course the president sold it as not being attacks now he.
Everybody admits it is -- -- course most of us knew that but they're all these other taxes to pay for such as one tax.
And among them is a new three point 8% surtax on investment investment income among wealthy people.
There are a lot of taxes that could drag down the economy as a result of this is this decision itself look dead in its entirety is it a drag it.
-- a boost to economic growth.
Quality national budget office estimates and other.
500 billion dollars in taxes south noted it is it will be a drag on growth and I think -- challenges he just in the earliest arias.
And I've got to congress that really is voting on Eric Holder appears to be not a very good situation terms are coming to an agreement.
By the end of the year to deal with this fiscal -- self you know we see economic growth around 2% in the second quarter much like the fourth quarter.
Slowing down just a little bit don't want to have to tune and the third quarter.
Real disposable income is pretty much flat.
At this point in time we don't see a lot of stimulus coming throw in terms of the overall economy so you know we'll stay on the low side -- overall economic growth.
-- not a recession but -- not much growth data.
Let me just say speaking of the low side take a look at -- we just want to get our viewers this it has now come off being halted and it is getting hammered down 17%.
In the wake of a much bigger than expected loss on both the top and bottom line missed by a long shot on EPS but also on revenue.
At of course the stock.
As predicted by Mike -- -- easy just a few minutes ago would have short term immediate very negative response all right back toward discussion.
Chris you heard it just -- John Silvia.
Has has outlined what he really feels are some very difficult times ahead.
What did you hear in his argument that told you know I'm right he's wrong.
Hello my -- we gotta -- something in my -- -- bulls vs bears.
And realistically our views aren't -- fall apart neither one of us is calling for a recession I think the biggest difference is what we see towards the end of the year.
He's a -- purpose said to have growth from the -- for two and a half percent growth.
Here's the biggest difference he just said -- incomes are growing.
Yes they are because don't forget the CPI's dipped into negative territory.
Because of falling energy prices that's gonna take to sort of modest nominal gains we've seen in income and turning into super nice solid real gains over the course -- summer and I'm hopeful that's gonna keep the consumer going which will in turn helped keep the economy moving.
But I agree there are some significant headwinds out there.
I'm not calling for anything even close to average growth eyes so I guess you would say -- at -- a modest bull alright by the way I -- Risk of turning this into a combed by our moment where -- average -- every -- John I'm gonna go back to because I know you both majority.
That the Fed has law has shot its last silver bullet right there's there's I don't think either of you think that the Fed is gonna come to the rescue this growth problem right.
While the -- at this point as a pretty flat yield curve and to extend.
More purchases of treasuries.
Is limited at this point self I think the Fed has more -- the and the game of giving confidence that a -- that it will provide some liquidity if there's a big issue but -- terrorism moving interest rates are moving the economy I think we're pretty much is done.
How about the US dollar anybody looking at that it has.
Depending on -- -- you looked looked actually stronger today pull back a bit but was still looking good Crissy first.
Boy I want that to go down let me tell -- out whenever I see the dollar started to rise and that's bad news because it makes our exports less competitive.
That dog needs -- -- and again I go back to -- idea.
What's Europe's greatest threat to the united states of course a big decline in the Euro -- -- -- exports exports are have to be an import very important part.
-- the ability for our economy to gain ground again.
And that -- -- from my perspective.
Down as we're gonna see we have our you know -- really quickly do you see it as a negative.
Well yes because I think the European situation is -- to much lower US treasury rates.
And a stronger dollar OK Chris and John thank you very much this --
