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Lehrman Institute Chairman Lew Lehrman on Federal Reserve policy and the potential fiscal cliff’s impact on the economy.
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Well investors optimistic on the -- negotiations following speaker Boehner is offer of a tax rate hike.
For those making more than a million a year Boehner report oil also willing to.
Well postpone the debt ceiling issues for at least a year.
It's unclear how White House aides do -- the offer is progress joining us is Wall Street legend.
-- -- chairman of the -- institute former chair of the -- gold commission American historian and great America good to have you with us to be here always.
This is wonderful to watch them with the equity market -- responds.
Just the suggestion.
That the two men are actually talking even if talking by one another what are your thoughts.
Vote the fear and trembling that's been.
Spread all over the country the world about America falling off the cliff.
And -- a recession in the United States to be used economy in the world.
Can cause contemporaries burden and activity however.
It shouldn't be forgotten that preceding this was the Federal Reserve's.
QE four announcements that is to say.
Purchases of 85 billion dollars of securities monthly which is a trillion dollars in a single year figures creation of new money money makes -- -- -- You -- suggest.
About -- policy extra 45 billion dollars a month from the Fed in the market.
Will will have greater influence than just say whisper between Boehner and the president is the well I fear I am setting up low.
Look I mean the amount of money which is being created by the Federal Reserve System and foreign central banks to finance the US treasury.
Makes it.
A situation where Americans cannot even appreciate the fiscal deficit the and the need deficit goes on as if there were no deficit because the banks are pretty -- money to finance and.
And the projection is that run to workaday Federal Reserve balance sheet that will expand by a trillion dollars.
Over the course of the next twelve months that's that's pretty significant.
Funding and Avaya -- into the monetary system.
What do you do you think it's foregone conclusion that we're going to see finally.
And I'm not encouraging but I'm just saying finally the advent of true inflation.
My my own forecast for what -- word is that it.
He is the inflation will not really pick up until the unemployment rate falls much closer to 6%.
The wages are so much under control -- it's made actually.
With -- working people of America much more competitive with.
They're competitive nations abroad which I think will be one of the surprises next here that we -- even do better next year.
Even under fiscal -- -- It's can we.
Do better if the working man -- woman in this country is doing better and I and I'm not asking that as a matter polemics or partisanship or ideology.
But we have watched the working man -- woman in this country their wages.
Whole effectively stacked.
Over the course the last three decades.
We have watched the share.
National income that goes to corporations.
-- Rise to the highest level since the Great Depression.
We have something amiss here it's in fiscal policy it's in monetary policy in and of the we don't seem to have anybody talking about how to correct it.
While I certainly agree review without working people middle income families having rising standard of living.
We are not going to see the kind of prosperity that America as witness really since the birth of the republic up until just about a decade and half.
Half ago the real issue is that.
The workers now get wage increases of approximately 2%.
And their lulled into the belief that they are getting wage increases the problem is the price level for them in the cost of living.
The basics.
Is rising faster than their wages which of course costs to their standard of living to -- the key is.
Raising the savings rate.
Such that the savings will go into new investment new production which will require hiring more employees at higher and higher wage rates.
So we're really do need to start businesses and we really do need to get some economic growth.
So -- some -- to say certain we can't do that though unless interest rates rise above zero giving incentive to everybody to save money.
And -- offered in the capital markets could create new jobs new factories new plants new equipment and products and that prospect.
Still always -- -- always very hopeful.
Lou in great country great possibilities we have this we have a chance to do and it's I think.
But did -- have no dodger wrong but I don't take I'll take Inspiron say thank you very much we'll ever has or -- to see in his view.
