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UBS Economist Drew Matus on Ben Bernanke’s speech and the potential for further quantitative easing by the Federal Reserve.
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Into the -- and my heart and find out what you need to know right now we're gonna cut through all the noise to get to the heart of what Fed Chairman Ben Bernanke -- really means for investors.
UBS economist drew mad as joins me now from the yeah.
All right Stamford Connecticut with the foremost important investor takeaways from this speech in Jackson Hole this morning -- -- -- De risking -- -- -- let's talk about this.
It appears that he told us study does still favour QE at some point how much -- -- favorite salad in your opinion.
Well I think he's leaning towards QE vs all the other potential options he could use.
-- -- -- very spirited defense people like myself and others in the market have been arguing that it there's very little room for him to do more QE.
He pushed back hard against our viewpoints.
We still think -- right but you know I don't have a seat at that table.
And and if he does more QE expect they'll be counterproductive.
He also talked about the cost of mean.
I guess -- the costs on monetary standpoint but frankly the cost to the economy with all the programs that they have instituted in the past.
Do you feel that he gave you a little more of a sense.
Of his ability -- it maintain.
Kind of the the bond buying program that they've been did -- So party expected to use.
Well he certainly thinks that they can I would disagree -- them I don't think they can without disrupting the market function.
He says.
Actually that our model suggests that they have -- to work.
That they've got the space to do more if they want to.
Men and I would submit that it you know if you talk to people actually trade the things that they wanna buy that they might have a different opinion -- the Fed Chairman.
All right let me ask you about this and he made this comment in a note that you put out just after that speech this morning you said that -- -- slouching.
I'm assuming you're not talking about the Fed chairman's posture.
Now let you know as a literary reference -- say slouching towards QE3.
It always seems like it's it's inevitable event that just has to happen no one's really sure why it has to happen.
I understand the growth is disappointing understanding unemployment rates high.
But the question is really what can fed do about it at this point any answers not a lot really -- we've we've gone beyond what monetary policy can do.
And as much as -- fed point pushes back and says while there's no fiscal policy helping out we need to do we can.
You know sometimes -- one is not a substitute for the other effect -- -- -- most of time a monetary policy is not substitute for fiscal policy.
And trying to make it one is a bit like senior rest -- -- drags and instead throwing tomatoes.
Okay killed let's cut through one thing here I mean what -- they have a dual mandate that is monetary policy but they also have an employment mandates.
Do you think he did an effective job today of maintain that employment mandate did he tell you what you wanted to hear about the jobs.
Picture.
Well ER is just a weekend and I would certainly agree -- that but the question is.
Even if the Fed did everything right what can you get your point rate back down to right now.
The UBS we think there -- large mismatches and the economy either skills mismatches there's education mismatch as -- jobs being created or not the jobs of people qualified for.
Necessarily.
There's probably a little bit of a geographic mismatch which -- some people are locked into their homes they don't want to move although I would say that's probably overplayed a little bit.
But that the simple fact that matters there are a number of large number of jobs out there that no one in the United States can fill.
Oral apparently the company can't sort for not present -- -- to find people could actually -- them.
That bumps up the unemployment rate and keeps -- high and I think that's part of what's going on and there's nothing -- fed can do to -- that.
I think that well I mean it you know you've had so many analysts like yourself come mountains say that they are quite -- quite out of bullets.
You might be right at that point as well through -- -- it got the idea wanna ask you.
Is -- one thing in your mind one trigger point whether it's in the US or Europe.
That what actually force -- Bernanke to pull the trigger on QE3.
I you know I think the leading that direction anyway but if you wanna see a -- point I would say if the unemployment rate continues to move higher.
Ben Bernanke cannot tolerate that.
You know based on their view of how the unemployment rate is moving and and what they can do about it they think they can move -- lower if it starts moving higher they're gonna have to react.
True UBS economist -- -- Esther thank you very much -- to say pretty busy.
These action behind US that the train -- in Stamford Connecticut nice to see everybody is still working on this holiday weekend as we approach the -- -- we don't take out -- infected and we don't take all these are -- -- -- -- -- thank you very -- have a great weekend --
