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Wells Fargo Chief Economist John Silvia on the Fed’s latest actions in an effort to boost the economy and job growth.
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I'll join you mean now wells Fargo's chief economist John -- bids are great to have you here.
Six and a half percent is the target for the Fed Chairman and the Fed.
That's the unemployment rate they want to hit before they change monetary policy.
I've never heard of the Fed ever doing this before have you.
Now it's -- -- there's a danger here for the Fed being so specific on a particular number.
What we seem -- little actually in the last two years is that the unemployment rate has dropped for whatever reason.
Up by about 1% each year which means at seven point seven we could easily be at six and a half.
Six point seven in one year and that's far ahead of the 2015.
Now is -- -- in the marketplace so be sometime a terrible you sell specific is too dangerous.
And the terrible thing about that is and would be if that were to happen going to six and a percent of the year.
That it would very likely be the result of more people leaving the labor force rather than more jobs and we need literally millions of those jobs to be created.
-- as you point out so.
That the program the mortgage backed programs staying in place been buying gallery.
Five billion dollars of treasuries a month.
What is your your assessment of the impact there what will it mean to the economy and -- market.
The basic change that you we see is it does it -- to Operation Twist.
Now the Fed is a net buyer of treasuries which -- the Fed's balance sheets gonna increase about a trillion dollars.
Over the next yet.
This is again very much uncharted waters but it does mean a lot more liquidity in the system and as you know.
President lack or other Richmond fed sat in his dissent.
You know this threatens our inflation credibility and but the Fed in general sell this ultra -- -- threaten.
-- -- art throws -- that out the window I mean basically that the Fed has just said the hell with inflation.
We're going to and -- they're acting like it's if you will 2009.
All over again.
Well what bothered that treasury market and be it commodities market and -- cost a dollar was all of a sudden we went from a 2% inflation target not a two and a half percent.
And like wait a minute we we just we just -- our inflation number.
And that changed market expectations -- I think the Fed I think chairman Bernanke in his question and answer period tried to.
Indicate that while 2% really just allow long we're on target but will tolerate two and a half.
But quite frankly low and and the world of politics and economics it's gonna be two and a half percent that that kind of -- have backed -- -- That tour and amp is 20082%.
I think -- repair -- elect and and in the things suggesting otherwise I think it's a little.
A little ambiguous to say police ambiguous it is the direction of this market.
I'm amazed -- you that this market is staying at high is that is.
-- in the face of these ridiculous negotiations and this ridiculous ultimatum on the part of this president about raising taxes.
And his insistence of Republicans caved in and been -- his will like he is some sort of -- Imperial president always -- -- maybe he is I.
I mean this lie and -- I thought it was interest in your lead -- was right -- I was very good in the sense that.
Nobody wants Bernanke started -- talk about.
While possibility of a fiscal cleft -- -- it was solely on the market seems to think that whether to solve this fiscal -- problem no trouble at all what is gonna move ahead.
And I think digit just totally discounting any probability that we have a fiscal clap if we do have a fiscal -- situation negotiations.
I do write down.
Then the market I think is going to be way overpriced -- -- very difficult economy -- we'll see the first half of next year.
And we might even see it before the end of the year if it's clear that there and this may be part of the game they're trying to keep it ambiguous as to whether or not there will not be a deal.
-- at least that would be it.
That would at least be -- -- portion of this negotiation.
I don't know what to make of it but I do I do think that the Republicans are now incentivized to go over the cliff.
The cut and there's CC frustration and force because but as sequestration is bipartisan.
The president signed off on it it gives the Republicans what they want to for one.
Is spending cuts to tax hike it gets he gets interest -- Yet isn't just in because that some of those that commentary I've seen recently.
Suggest that the president is actually talking about you know -- us.
Tax increases and spending cuts.
And that is again likely to walk -- -- copper good job on the contrary to what the original agreement was well.
Imagine that.
-- -- -- -- -- -- John -- thank you for being around regularly and straightening straightening us out as all.
The single.
