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Fed Meeting to Be the Biggest Market Driver?

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  • Description

    Merk Investments CIO Axel Merk gives his outlook for the Fed and markets.

  • Duration 3:55
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Much.

OK all kinds of events for marketplace to digest the week my next guest says the most important driver of the week will be that -- decision.

Things we will indeed get more stimulus -- now -- -- -- president and chief investment officer of -- investments -- great to see you again so as you know lot of investors are quick to criticize Bernanke -- another round of easing.

But what do you think is going to Bernanke's mind as to why this is likely going to happen -- needed.

Sure and and we don't like but the Fed is doing -- -- that but it really doesn't matter what we think it matter with what he does.

And to understand what he does.

Go back to the FOMC minutes from come a couple of weeks ago when he indicated that the one of the -- -- it might be using.

-- to promise to keep rates too low.

Even as the economic recovery picks up.

So that means that if economic data come -- better than expected will still keep interest rates low.

That is what I'm looking for because nobody knows how at least we think he's going to have a QE3 announcement.

The moment you announce -- people are gonna price that in and say hello what's next in order to avoid that he needs to keep that carrot in front of the donkey and -- Promising things down the road.

And the way he does it is says hey we gotta keep rates on that we is by the way does that is because whenever we have an economic pick up the bond market sells off -- -- does that tightening for the Fed and -- -- doesn't like that.

So let's talk a little bit about inflation I'm wondering if this is also part of the strategy.

Right considering there's so much politicking going on surrounding the sixteen trillion dollar national debt.

How to solve it you know if you can just a little inflation with a wealth effect with another round of easing may be you lower year to get debt to GDP ratio.

Well that's one way of looking at the other way is that and they waited -- -- he looks at it is the -- and onto the housing market continues to be the most important thing he reiterated that in -- Jackson Hole speech.

-- three ways you can fix it when people to hop on the ward in a mortgage.

You can have them.

Downsize that means before it's you can have them pay off that debt both of these options -- a very attractive and -- that option as you raise the price level you induce inflation.

Now nobody at the Fed will have a call it that right but that's what they need they need to have prices move -- and that's why they're buying mortgage backs right in this purchase and from what I understand it's going to be an open ended.

Well that's one of the proposals on the table on what will -- have to -- to specifics they might just indicate that -- -- -- money but will -- without the election to be less political all of these in my -- details the important -- get to -- talent -- how he's gonna make -- that this -- stays in front of the -- so that the market isn't just -- price -- in and saying all right -- a billion laws so let's move on with it.

Now that's challenge that's actually great way to put it update me on Europe what's going on know that the -- so losing little ground nothing major.

Today but there are some gyrations.

We've got some news on -- -- rejected a bailout by the troika right -- so.

Watching Italy here argued against conditionality with that big bond buying program announced last week.

What's -- story Axel.

Show what we think the Euro is gonna continue to gain steam commented -- because everybody hated it two months ago now it's less risky I'm not suggesting it's risk free.

We obviously have the constitutional court -- on September 12 we think that in the unlikely event that would be reject that he.

It will be some short them come out what they'll just change the constitution.

Well ultimately what the head of the European Central Bank has done.

He's imposed the process on politicians don't falling in line now falling in line doesn't mean it's going to be some with the right there's going to be a lot of bickering we have an election in the Netherlands going on for those -- -- -- to talk about but ultimately what's happening is that the weak countries.

Give up sovereign control over the budgeting which means they're moving towards a political union is not exactly and -- great political union but then again where the politics work well know when -- wells in the US in we have anywhere else we also don't get -- budget and what -- But it needs to be a political lot of -- problem.

And we are moving in that direction in Europe so we expect the Euro to -- to get stronger and the dollar to -- -- -- it will keep our eye on that -- summer thank you for the update.

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