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Kevin Caron, Stifel Nicolaus market strategist, on the Federal Reserve’s reaction to the economy and global economy.
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Higher we've also got a stronger dollar our next guest thinks the Fed more difficult position when it comes to whether or not policy responses need it joining -- is Kevin crimes -- Well -- actor Kevin -- to see you once again.
Good dear Larry so -- the Fed looking at all this I think it's interesting that the markets are holding up relatively.
Well despite the fact the last -- was rather lackluster -- -- get a firm commitment from Bernanke that he was fired up the printing presses again.
Right at right and I think that that makes sense I know that most of the data on the global economy has been -- -- -- led lower by Europe -- manufacturing so on one hand.
You can look at the -- -- -- growth around the world and and conclude that something easy done in terms of stimulus but if you go back and you look at Bernanke's first FOMC.
Minutes -- when he became chairman of the Federal Reserve.
He listed five things that need to be looked at in terms of what market is saying right that monetary policy.
And those include tapping the stock prices the dollar.
What's happening with the spreads in the bond market what's happening with the breakeven rate of inflation all of those things are speaking towards.
-- -- not cutting rates or not doing more.
-- whereas in the last few times we did quantitative easing all of those things were falling precipitously.
And word encouraging an opposition situation the background is totally -- -- was the last time.
That -- yes not and that easy for Bernanke to pull the trigger he left the yes and those are those aren't my eight.
Measures I picked out those were actually things that Bernanke himself.
Thought were important to.
It would be important to look at in terms of gauging what markets are -- are saying about my -- -- growing chorus of investors and the investment community overall around the world expecting this September -- Yeah -- well that's true and I I think that if not most of that's coming from the observations.
About the fundamental conditions of the economy.
Manufacturing -- been being weak globally.
There's a -- Low level of demand coming particularly out of Europe United States is doing reasonably okay in terms of final demand.
But these very slow levels of demand coming out here is that are impacting production out of let's say southeast Asia so all around the world we've got weakness.
But on the whole I'm a little bit unsure how more quantitative easing actually is that help resolved in -- baton and use that up.
And parallel politics actually because as you know the president touting that bail out the auto industry is being so successful in the Republicans are piling on we're gonna talk about this more in our our.
Think I'm not just bail out all of these industries.
Our economy forget the markets -- so would addicted we talk about the -- time right to stimulus but.
It isn't it telling that the markets are really quite resilient despite -- this is kinda getting back to my first question to you.
We should just rip the band -- off at this point this to stop all of the stimulus to see what happens -- your markets going.
Both an awfully big band aid because when you think about the numbers that that's actually quite staggering if you look at the amount of spending.
Federal state local spending -- a percentage of the economy were approaching about 50%.
It was only -- -- three debt generations ago where that number was closer to 10%.
So if you draw a line through that.
That's really it's really just a simple matter of matter how large the government has become relative to the whole thing and as you pointed out -- your previous segment regarding coal.
The regulation that -- -- burdens -- -- relating to regulation.
Have grown at an equal equally rapid pace so ultimately ripping the band -- off would probably be the best thing in order to let markets function.
But it's a very very big band -- And I think that there's -- and it is no one's real sure how if you rip the band -- off it what what that would mean at least for the near term that's -- heck of a balance sheet.
Right incidents that thank you Kevin great to see you at the weekend.
