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Former Federal Reserve Senior Economist Kevin Hassett on the state of the economy and whether the Fed should take further action.
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Well today's disappointing jobs report fueling hopes for new action from the Federal Reserve when they gather next week.
Governor Romney today suggesting you measures would do little to stimulate the economy.
I think it's hard to predict exactly what the Federal Reserve will do.
I don't think there's any action that they're gonna take that will have an immediate impact on the economy and frankly I think they've they shot a lot of the monetary bullets and and and those bullets aren't able to strike.
At a target that makes a real difference for the that the American worker today.
My next guest is an economic advisor to the Romney campaign telling me now Kevin -- former.
Reserve senior economist and director of economic policy studies at the American Enterprise Institute.
-- great to see you again.
Look at the price of gold Wall Street.
On that jobs report betting that bad -- she is firing up the printing presses.
Yeah we saw that in the minutes of the last meeting so what's gonna happen because the jobs report you know make no mistake about it it was just miserable today.
In fact I think it was actually worse than the top line number because there were seasonal factors that probably boosted -- a little.
The fact is that we -- the last meeting that in less the -- up Blockbuster report in the Fed more or less promised quantitative easing round three at the next meeting.
I think that they held QE3 off for the next meeting because that this meeting we're gonna see all their new GDP forecast.
And -- that there's gonna be a kind of movement towards transparency as well we'll see.
Really pessimistic forecasts from the Federal Reserve board members and that'll justified the QE3 that they're gonna announce I think it's probably -- 99% chance now.
-- district -- -- for governor Romney suggests another round of easing probably is in do much to juice the economy Ben Bernanke for what it's worth himself at Jackson Hole last week.
Was fired up criticizing congress like saying hey you know there's only so much -- can do with monetary policy give -- some fiscal policy to help out here.
Right -- indeed.
Have not co -- there with John Taylor at Stanford -- -- you at Harvard and Glenn Hubbard a Columbia the paper that looks at what would happen to the economy if we passed Mitt Romney's plan.
-- actually you know got congress off -- -- and started legislating says you know cut the corporate rate -- the tax code and reduce the deficit.
If we did all that -- we could create twelve million jobs over the next four years really conservatively.
-- that's the kind of growth that we could -- had over the last two years if we didn't have the gridlock that we've seen because basically.
President Obama is so stubborn that he's been absolutely unwilling and unable to work with Republicans the way that even Bill Clinton did.
So why why why go this route then another round of stimulus.
You know is there an imminent fear that the US is about to go the way of Europe that -- will default or.
Virtually broke if you look at that sixteen trillion dollars in debt and it interest rates as a result will rise fast and sharply.
Right what -- the fact is that don't don't forget that economic growth right now is in the ones.
And we've got Europe that might explode.
We've got that tax McGann and in the fiscal cliff coming at the end of the year there a lot of negatives that are gonna take you down below one.
Which means that we really are in recessionary territory right now.
And that has the Fed panicked.
And so what they're gonna do by the way the last step in this QE3 is that they're gonna not buy treasuries so much as they're gonna buy mortgages or mortgage backed securities and I think that by doing that they're hoping that they can drive mortgage rates down.
Get people to refinance put some more money in their pockets and drive the economy back how did you think is -- I wouldn't I wouldn't do it by the way.
-- -- How did you think this latest on his QE3 is going to be.
Pose another threat is more more idea that actor need to do we know yet what the total value will be.
-- you know I think that we know.
That what Bernanke wants to do.
Is announced that it's gonna be open ended that they're gonna do it for as long as it takes as much as it takes and my guess is that -- say something like we're gonna do thirty to 5000000000880.
A month.
And we're gonna keep doing it until we're satisfied I think that that's what most of the the Fed watchers are expecting that we're gonna see.
Why just push out the forward guidance maybe he already did that -- -- interest rates at record lows for yet another year.
Stop paying interest on the excess reserves to encourage the banks to throw out more money lend more money.
I mean it's it's like really is it enough it is enough already the.
-- -- -- -- I -- absolutely agree and I think that if the Fed keeps trying to innovate and and really intervene in markets then.
They're moving very perilously close to being central planners.
You know what their argument is is dead dead -- their actions have driven down treasury rates but not mortgage rates and so what they're gonna do now is they're gonna do QE3.
And they're gonna focus on getting mortgage rates down by specifically buying mortgage backed securities.
Says that they're thinking that they're gonna who wants a somewhat new policy towards a specific asset.
But it -- -- in the world where the Federal Reserve on a whim decides to buy this thing her that thing.
Then it's a fundamentally different world than the one that made America great so all of a sudden we've got the central government intervening in whatever market it feels like because it doesn't like the price.
That's a very scary world and that's the world that Bernanke -- instant.
And that's in large part I would imagine why my colleague Peter Barnes while interviewing.
Governor Mitt Romney last week suggested that he would replace the current -- -- reserve chairman.
Have you -- more ideas on that.
What well you know governor Romney had has said that -- numerous occasions that I think.
Peter Peter usually get scoops and and I I think that might might have been a scoop for the media -- but I think it's been pretty well known -- -- economic community.
The governor Romney has been very dissatisfied with the monetary policy and he any spoken pretty strongly against Ben Bernanke's actions.
You know I think -- that you know -- I've known Ben for many years he's a good person he means well it's not that he's a bad guy but if somebody's pursuing policies that are that radically different.
From what we need to get this economy moving again that it's appropriate for governor Romney is say that someone else is gonna be put in that position if he's president.
Kevin has -- great talking to you thank you sir.
Thanks -- to be here.
