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Former Dallas Fed Chief Economist Michael Cox on potential further action by the Federal Reserve.
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Next guest says the Federal Reserve conference in Jackson -- is much ado about nothing for more insight from a man who's been on the inside.
Right now by Michael -- former Dallas Federal Reserve chief economist -- -- Fox Business exclusive.
Hi Michael let's talk about this because overall he kind of reiterated again what we've heard several times from the minutes from the meetings the statements you name it.
It is ready to act if needed what makes him pull the trigger.
Well I think that's your previous guest said they would be some further weakness in the economy such as an increase in the unemployment rate or further declines in real.
Household median income you know since the recession.
Real median household income -- to climb above four point 8%.
So we've seen income declines over the last three years -- leadership in this economy.
And if this continues to happen -- -- the Fed's gonna have to try to do something but it won't it I think the Fed knows it won't be something that has any effect it'll just be something that saves face.
Michael do you do you think that the Fed has done a good job of of curbing inflation maintaining inflation because that is the one thing that would change.
What we're seeing right now with interest rates at record lows.
Inflation has been under control recently but let's not forget that the what the Fed let deflation happen.
During the recession in fact there was up three month period there were prices were falling at an average annual rate of 15%.
And so at a time when we did not could not stand any weakness in prices the Fed led the inflation happen and what that did as it multiplied.
Itself into a decline in real estate values.
And -- what the responsible for a lot of capital losses on a lot of foreclosures and a lot of defaults on property and so.
You know in the worst possible thing that could have happened would have been deflation -- the Fed let that happen.
Now we're having fairly stable inflation running around 33 and a half percent -- got up to three point 9%.
Yes yes the Fed has done a good job of crawling controlling inflation which is about the only thing the Fed can do -- -- they don't have power.
Beyond that to grow the real economy and create jobs -- congress would like to assign them.
Well in the one that a case they get a congress he mentioned jobs want to admit that mr.
Bernanke to -- -- like to call when -- good commit.
Is that he's been very vocal about his criticisms of congress I mean that's the one -- he still can't -- Is -- to be -- congress to get something done by the end of the year.
But is his voice a true voice in the fiscal club fight do you think.
-- Think that they listen to that it can only a little coming in that you don't with the -- the position the Fed has got itself and overtime and generally they didn't ask for.
But in 1978 the congress passed something called the full employment and balanced growth act.
We're in congress essentially assigned to the Fed the job of keeping the economy growing in keeping unemployment rate low in addition big responsibility they had at that time which was to control inflation.
Now this is not something the Fed can do the Fed can't make create jobs the Fed can't create.
You don't -- faster growing economy.
But in at first when the Fed was us on this role live objected to wouldn't that way -- we can't do this this is not something we do this is a product of good fiscal policy.
But S economy started growing and doing well and people started slap from the Fed on the -- Fed Chairman on the back in the starting getting.
All of this wall or in all the credit that they were getting the kind of forgot that they couldn't do it started accepting the praise accepting the role but now they've got themselves in the situation.
Where they can't make good news best that this happening.
And they can't make good stuff happen again because they could never in the first place.
They become a sense of that whipping -- for congress which gives congress the right to go out.
And do whatever they want to the economy to get reelected and throw wall console -- -- walking -- in the congress.
And the economies -- and it's gone from the blame.
-- well.
They have they they could be behind some more mortgage backed securities -- -- -- that wish LC Michael Cox former Dallas are reserved.
Chief economist and accusing boys thank you very much for -- talk to you thank you.
