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Economist Peter Morici on the potential impact of more action by the Federal Reserve.
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So if at first the Fed doesn't succeed try try again the Federal Reserve has kicked off its two day FOMC meeting.
And everyone is expecting a fresh round of stimulus to be announced but economist Peter -- C says.
The Fed has failed to -- the economy twice already and the third time.
Not -- I'm Peter joins me now Peter why you so pessimistic about QE3.
What interest rates are already at record lows because conditions in Europe.
We really had QE3 by virtue of all the money in Europe frightened coming to America invested in the bond market.
Look at mortgage rates they're boosting the housing market about as much as you can be boosted right now.
So Peter everyone's on the same page with you so why would they bother even doing.
Political pressure remember his most recent testimony of the Senate Finance Committee and its senator Schumer telling him to get busy.
To do something.
Well you know I'm afraid that the Fed feels the -- doesn't act and things do come apart in the new year it'll be blamed.
That's a poor reason for doing business but I'm afraid that's the kind of business the Fed is doing these days.
And ironically -- -- it's really doing is using the stock market I mean it it's giving all kinds of juice to equities this is exactly what President Obama says he doesn't wanna do you know I mean these big fat cats on Wall Street that he doesn't like it is anyone gonna call the administration out -- and well I don't.
Think the administration really doesn't want equities -- for the next thirty days but longer term you really don't want.
Valuations.
-- either in the stock market.
Or the housing market from ultra low interest rates that won't be sustainable -- -- when you return to more.
Normal rates you know at some point all of this money well lead to inflation it hasn't yet but what it does we won't be able to sustain these rates you raise them a bit again.
And that housing prices go the other white stock prices go the other -- and your back in the soup.
-- -- turning point happened because there are a lot of people who say that you know inevitably you're gonna pump this much slack into the system it has to come out somewhere there a lot of people think gold is cheap right now.
As a result of all this when does that chickens come home to risks and ST well.
When you start to see unemployment fall a bit further not because -- fed actions but because of other policy measures for example we had a Romney administration.
And he did indeed do what he says he's going to do with regard to China and energy.
That's gonna bring us closer to full employment.
At that point in time the effects of this QE3 which start to really bite you know monetary policy comes -- -- -- The bigger leg and fiscal policy we can still start to see an inflationary problem next spring.
Yeah a lot of people blame Alan Greenspan for the housing bubble and if you think back you know to -- 2000 to 2003 felt a little like as were rates were lower and lower and -- -- that you know is as a bubble that's gonna burst down the road where do you think we've seen the Bible.
When it finally -- -- well I think.
We're gonna see -- in housing values and stock valuations you know the stock market if you look at how rapidly it has been rising.
Can we say the American the profitability of American firms has been moving up that way.
You know not really I'm starting to become a bit skeptical about the stock market values that we have and certainly becoming skeptical about the price increases were starting to see in new home construction I don't know that the locations really warrant that.
And you know I think that housing values -- we should be.
Hopeful that they don't move up too fast now always insightful -- -- thanks so much for your time tonight.
Take.
