This transcript is automatically generated
-- about the Federal Reserve moving the markets again stocks lower today.
On new worries the Fed won't employ new stimulus measures give us a lot that's what the market says.
This after the market rallied somewhat yesterday afternoon when the Fed appeared to hit it would take action so what's the real story.
Let's ask former Federal Reserve governor Randy cropped -- Randall -- welcome back to show it's always great to have you here the Fed minutes seemed to indicate we're gonna get kinds of some kind of stimulus and then.
Here came James Bullard the Saint Louis fed president saying that's.
Going along at the slow pace is not enough to justify gigantic action I'd like to see some deterioration or indication we're going to slide down further.
So what are they gonna -- Well I think Jim made very clear as -- have that quotation -- -- speaking from self not for the entire folksy.
If you look at the minutes you'd see that the number of members thought that that.
Pretty close to.
-- to take some action so I think.
They have made a final decision that's -- that they didn't take action the previous meeting.
But -- really waiting to see how the data are evolving I think the employment report that will come out in about a week and a half for two weeks will be very important.
Well really heavily read that at what level do you think we're guaranteed fed action what was the number have to come in -- That the Fed would say boy we have to step -- I don't -- -- any particular number I mean I was said they are sitting around the table that wasn't my gosh if the numbers below this -- above this.
That's a trigger points for action.
It's a little bit more nuanced than that it's sort of wears the direction going still be looking at a few of the numbers.
But I think that -- if you get a very disappointing report that the markets are expecting.
In that and it in that it in the previous month.
If we don't if we get -- they like half of that in some negative.
Revisions to previous months that makes action much more likely.
While that's a good guy I you know clearly jobs are critical jobs are important for work but another thing that may be important and you -- -- -- you've been there I haven't.
Is that the pressure from Washington and the pressure from Wall Street is that important as well.
They're always pressures from Washington and from -- trend and and how.
And that's just as part of the job description when you're at the at the Fed.
And you just have to accept that I think you're Bernanke really wants to do what he believes is best and right for the economy.
And he will do that regardless of what pressures might be coming from Washington or from the campaign or from Wall Street.
Does it ever -- sort of a reverse impact where.
It if the Fed feels like they're getting a lot of pressure from the White House -- like now we're not doing what you want to and just forget about it.
We're gonna sit tight would that ever happen.
I guess it's conceivable that it could happen -- certainly wasn't the case when that when I was there and -- don't really see very much evidence for that I mean I think the German just wants to do what he thinks is right.
And anti -- saying it's good or bad.
You know that's what they're gonna say.
As a matter of fact you say open mouth operations may be better than anything else what do you mean by that.
So when the Fed buys securities that's open market operations they're going to the market buying some things.
But they can also try to improve the communication strategy and I took -- open mouth operations -- some things that they might do RX just extend the at the time.
Before which they think they might that raise rates is going to be coming out some new forecasts.
But also what they can do is a set of talking about being very frustrated with the amount of side -- the slow pace of job creation they could say well.
If inflation is expected to be under our target of 2% and if -- -- -- rate is expected to be move her some number let's say 8% -- seven and a half percent.
For the next year -- eighteen months that would be conditions under which we would act and I think that would help to give some clarity to.
Well to people.
I tell you -- I don't know how how much good gap that job -- can deal or even fed action.
Given the fact that a lot of this trouble it's caused by the fact that that.
Congress is not doing what it -- my theory that there -- lots of questions out there are no answers tax -- get an approach is we don't know what our tax rates are going to be.
I mean if the end of the day don't -- answers have to come from somewhere else.
I think the Fed can do some things they can prevent deflation so you can prevent a 1930s style deflation or Japan style deflation.
But the Fed can't get the economy going on its own.
If you have these fiscal uncertainties that are out there and the people in Washington are doing their job to try to reduce that uncertainty input is unsustainable path.
There's the Fed can only do so much.
The Fed can only do so much as much as we want them to do it's funny.
The markets I'd trade on medicine at the end of the day they only have so much power -- thanks for coming in tonight we have always a pleasure to have you on the show thank you.