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Peterson Institute for International Economics’ Joseph Gagnon and OppenheimerFunds Chief Economist Jerry Webman debate whether a third round of qua...
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The Federal Reserve released its minutes from its most recent FOMC meeting they came out at 2 PM eastern what do we see a reverse S&P and the NASDAQ immediately turned positive.
-- more quantitative easing -- large scale asset purchases to prop up the markets was discussed no action was taken we know that but should the Fed.
Make a move.
Joseph -- -- his senior fellow at the Peterson institute for international economics.
And a former Federal Reserve monetary affairs associate director he wants more fed action.
-- -- on the other side is Oppenheimer Funds chief economist he thinks now is not the time.
For quantitative easing before -- now not let me get to Joseph first so we have the first two rounds of quantitative easing.
Both had very salute -- -- positive effects on the markets that's not why they should be doing at some people would say correct Joseph.
That's correct it's not about the markets it's about employment and inflation.
We're we're really have.
Less employment that we need an inflation is about where should be a regular low.
But it one thing that we didn't see it was more employment in the wake of QE1 and QE2 Joseph.
So why a third round.
Well.
You know it.
There have been studies that argue that it QE1 had particularly large effect on employment so I guess -- some disagreement out there QE2 is quite small operation to -- is quite small.
I think that they've been really quite timid for the past two years you know what.
You're right we should be fair on that we did see some positive.
Employment growth and then -- kind of slow down after January so.
Yes up until a certain point we started to see some action and at least were not contracting.
I'll get to Jerry your side of this and now -- take the other side I guess the question would be why not when we still aren't seeing businesses step up to the plate to hire.
Maybe it is the role of the Fed to continue to do something because they have the ability to do so.
Well they they have the mandate to do so I'm not sure they have the ability to do so -- concern about monetary policy it's kind of like penicillin.
You know it works really well for pneumonia that's 2008.
But it's not very good for treating the common cold it's.
And I just don't think it's the right medicine right now I don't think monetary power policy as well as it's been applied in the past as powerful as it is.
Is gonna help the economy very much and -- -- Under current conditions.
Joseph if the first two or not fit it in massive form doing it or at least having -- long tail and seeing the continued results of this.
Tell me how and what form it should take if we were to see QE3.
Well I would recommend that QE3 that would be targeted towards the mortgage market.
In -- particular I think the Fed should really.
Announce a range of mortgage rates it would like to see which it -- enforced by a limited purchases of mortgage backed securities.
And that and a and a deadline of time horizon over which that would be in effect again people who wanna get into the housing market.
Some certainty that for good six to twelve months.
-- financing will be there are at a super low rate and -- should give encouragement enthusiasm to really get housing back on underway.
Jerry -- that work well -- you don't White House you don't.
First so let's -- housing is getting better rates are very low Jacob Joseph makes a very important point about the availability of mortgage lending.
As opposed to the rate at which mortgage mortgages can be made right now the wait is it an issue that's what the Fed -- -- for this presumably effect.
The problem is the availability it's really hard to qualify.
And a lot of homes are currently underwater so it's difficult to refinance of the appraisals aren't there yet if you have that the Fed can't influence.
The price of housing.
Except by lowering interest rates I don't think mortgage rates going lower would make bail out would make more people qualified substantially more people qualify for mortgage loans.
We're at historic -- now yeah so will be watching this gentlemen thank you both and I and I know both the view will be canceling all plans August 31 went -- helpful when Jackson Hole has its big meeting in Federal Reserve chief Ben Bernanke speaks so we'll talk again thank you so much actually is.
Joseph and you and -- -- -- senior fellow at the Peterson Institute -- -- Oppenheimer Funds chief economist.
Closing --
