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Why We Should Be Glad About a Muddle Through Economy

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

  • Duration 3:22
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Addictions that this Friday's jobs report offering little hope improved job creation in this country is that actually.

Follow me here the good thing Axel -- is the president chief investment officer of market investments Axel.

The dirty secret is.

We cannot have an economy that grows too fast because interest rates would go up -- -- we wouldn't be able to handle our debt -- So be careful what you wish for.

Right exactly it's it's one -- -- -- said we're distracted with the -- -- by the way even if we get the Republican plan.

When you get a 5% deficit them every -- the next ten years and as similarly -- unemployment report.

Let -- economic growth -- guess what interest rates would go up.

All these assumptions in the fiscal cliff discussions.

Assume interest rates will stay reasonably low while that interest rates go up and and how what interest expense and -- about -- and we shall be.

Glad that we have this model of the weak economy because you that we really go down the cliff but.

That's just your -- -- austerity because we never really got to fix anything in the process.

Or hope that some growth kick in and indeed.

I'm what happens interest rates will ultimately go up we have so much leverage in the economy is gonna suck the economy right back down we cannot -- at what -- which means ultimately inflation is that wrote that we'll be heading off.

But is there anything that you can look at today and says that interest rates will go -- I mean in terms of economic growth in terms of wage growth.

Even and in terms of inflation that interest rates will move up significantly in the next even few years.

Whether what we know now is that the Federal Reserve no longer focuses on inflation but focuses on the am unemployment.

Be -- -- participation right unemployment rate that's why the unemployment report will be and -- more important they've pretty much promise to keep rates low until economic growth picks up.

Next -- the Federal Reserve will be even more dovish -- -- 2014.

And on these two will come up we think Janet Yellen.

-- will be appointed because Obama wants to appoint the first woman she is extremely -- so we've gotten to push growth at any cost the cost being inflation.

And at some point to the pro Hamas is gonna take no it's already taking note of inflation expectations top.

And that means bond prices might sell off when bond prices sell -- the dollars at risk because falling us I'm told all these bonds that's going to be in a -- market.

We're going to have a lot of come out -- but we don't have a European crisis -- -- a global crisis it might catch Japan next but we're certainly Canada -- well.

And -- higher rates are going to be in that.

Either because of growth or because the market defining gonna impose -- -- -- -- yeah how -- we got one point 6%.

On the ten year.

That doesn't say it -- inflation.

Isn't now but let let let's talk to let's just think things go back to quote unquote normal.

In recent yes everybody has felt very -- -- -- -- -- twenty -- buying the long bond has been the best trade have a well let the volatility go back to look to the long want to normal times you don't -- the Chinese to dump their bonds you just need normal content it will be a flight out of the bond market.

And that's going to be -- -- rude awakening to policy makers and investors alike found that means that you investments in the bond market about risk and which means that dollars at risk.

-- just to correct G I never feel warm and I think it's out there is one person to have -- about -- act up thank air as great if they act direct bailout and that.

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