The Markets Without Ben Bernanke

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Yeah I -- thank you to call it reports surfacing that the Fed Chairman Ben Bernanke will not be seeking a third term and we know that Mitt Romney has vowed to replace him should he win the elections at this point.

The writing seems to be on the wall if if Romney wins.

No matter who would replace -- guard our next guest says they're facing a dangerous monetary policy.

-- Monetary policy -- -- Axel America's president chief investment officer Merck investments as -- the fiscal cliff wasn't enough.

So Romney wins they say he's out -- -- with them what Bernanke said of Obama wins he's still out.

If Bernanke's.

Out what happens in the markets Axel.

What shall I mean if Obama wins it will get somebody like -- on key areas and Janet Yellen -- virus -- the Fed does Christine Roma from Berkeley.

They all wanna move away from an inflation target cause -- employment target sell more of the same little what more extreme maybe even.

But if we do get -- a Republican administration.

-- we get somebody like Glenn Hubbard and what that means is we'll test ban on his hypothesis.

That the race can be raised in fifteen minutes they want to mop up the liquidity but what does that mean.

We have so much leverage in the economy it means that interest rates would go up.

While the traits would go up and that means will face major headwinds and the economy.

And what that means also is that we'll go right back into recession which means we have to low interest rates right again book and at -- at the very least we -- and get them very volatile period ahead and importantly if interest rates go up right look at Europe.

-- Europe cannot afford high interest rates so we have the same if not worse problems so we have major challenges it well it sounds like.

You're challenging kind of this assertion that a number of people may does trees they -- Romney wins it's good for the market.

And for the economy you're saying it's just not.

That's simple -- women FOMC decision today but nobody expects any surprises out of but you say it's not that simple to all about who runs the Fed that's the the most important factor -- we.

It is much more important because ultimately even if we get around demonstrate he's not gonna get a majority in congress are trying to pass much but we will have different monetary policy but mind you different from the early eighties when vote -- raise interest rates to two to 20% to -- we simply cannot do that to date we just have to raise -- about 4% does so and we cannot sustain our budget in -- -- -- And that is that the bond market may wake up and importantly of course.

The dollar the dollar might suffer and that because finally.

If the attention is on the bond market if -- we get inflation was just tight monetary policy.

I'm I would get is not -- sustainable and unlike Europe we have a current account deficit which which -- of.

Bad news for the dollar -- before you came on today Axel I was all all -- ready -- forget about the Federal Reserve saying that.

You know they're not the story anymore they're out of bullets and whatever they do they've already kind of laid it out for us and now it's really about the other side of -- it's about the fiscal policy.

It's about getting this fiscal cliff situation dealt with by the end of the year and that's a much bigger deal.

For the markets and the economy now.

But if if we if we have the fiscal cliff let's take that scenario we've still going to have a deficit up what 3% of GDP before factoring in any slow down.

-- who -- this the same as European austerity.

I'm at some point it will have to happen will make his quote unquote tough decisions that we don't like yet it doesn't get us on the right -- a -- Feldman wrote an editorial today that said even with that has that went oh what we haven't fixed that was -- -- -- -- policy will support us and if and when we take that accommodation away.

We're going to be in real trouble let that money steak and we have the real problem right now today we're gonna get nothing and that's that the that the goal of the Fed to not that caught many headwinds and we're prediction -- -- -- up an actual recession we had back into one are now.

I'm initial what can we have to be far more worried about that money sticking housing markets like good I think will -- coming along -- fed will remain easy.

But watch that dollar -- dollar might just weaken because that's what the Fed ultimately wants to stimulate growth and if and when we do get some tightening.

That's not gonna be good -- a dollar because the bond market will be in a -- market and -- -- you'll see -- we gonna have a volatile ride on the Fed with another volatile ride with a -- Axel Merck has always thanks a lot.

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The Markets Without Ben Bernanke

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