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UBS Chief Economist for the Americas Maury Harris on the potential impact of sequestration on the economy.
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Well my next guest says the -- -- poses less of a threat to the economy -- while some politicians are suggest that.
Joining us now with his economic outlook chief US economist for UBS investment research Maury Harris -- great to have you here.
You're one of those one of those folks talking about dire straits and terrible things apocalypse Armageddon.
Is the president of these United States he's mistake.
All you have to do is -- the numbers.
They say this request -- -- 85 billion dollars.
That's based on budget authority what they actually spend lagged behind budget -- authority.
So -- economists figured this they take here's half of that 85 billion divided by the GDP and maybe it's retention four tenths of 1% it's not all bad -- right well and one of the things and I don't wanna engage you in this conversation on the president's veracity but the fact of the matter is.
As we've noted on this broadcast for a couple of.
Days.
The president talking about first responders policemen firemen.
EMTs.
Is losing their jobs because of sequester it is it is.
Bizarre because it just isn't true we don't know what he was actually thinking of when he said that.
I want to know what's going to happen with this economy and I think everyone watching this this broadcast right now wants to know.
Are we are -- in contraction in the first reading in GDP in the fourth quarter.
We're seeing numbers that suggest some life -- bigger to this economy.
Vote which is.
I think it's the latter there is life and -- in the economy.
And you know there's always focus right now on this question of business -- necessary to 85 billion they talk about overstates it.
But let's give -- -- eighty factory and let's say that happens.
Well that's for a whole year.
You have the Fed pumping in 85 billion a month and money into the economy that's a lot more important.
-- sure lending or borrowing were moving far.
That's great and you know the president doesn't mention that 85 billion a year being pumped into the economy by the Fed I don't know why he does do that.
You might allay some of his obvious anxiety.
I I do think it's -- to watch.
What is happening in this marketplace because from the Fed minutes came out -- with some nice aroma and god they're they're talking about.
Tightening monetary policy ending -- the bond buying program.
None of which I could do buying in those minutes by the way I could even -- the suggestion of it.
Yet we saw this market sell off for two days on that inference from those minutes and we and Bullard finally you know one -- -- fed presidents comes out today to say hey wait a minute we didn't.
You know that's -- we're talking about.
It's gonna stay loose is gonna -- Really easy money times.
What's your reaction to what turned out to be something -- a dramatic moment in the area.
The market that did the last well you know this -- you.
How nervous people are about monetary policy because so many investors -- it has been so important for the stock market.
In just with the least half.
That they're even contemplating.
Having this back on the table would -- to cut it back is enough to make people nervous now.
The reality was that there was this agreement at that last meeting.
But a lot of the people who objected to what they're doing right now.
Don't vote this year among the people who vote on monetary policy most of armored dobbs.
And it -- and -- and it's still produce well it's pretty much a leaders.
-- that are in the Federal Open Market Committee.
Give -- your your instinct on on these markets how we've we've seen fragility of vulnerability years just issued noted hero last couple days.
-- resurgence today or what should we be looking for in in the months and this year ahead of us.
Well I think that stocks are gonna outperform bonds and that's one of the most important lessons for investors.
It's hard to see how these listen to that real -- over Pimco is hard to see how these rates are gonna stay very slow.
I think they're fed is only gonna gradual -- pull out of the Q we.
But as your labor market improves further this year.
Investors are gonna start thinking well down the road mr.
Bernanke's not going to be pumping -- 85 billion dollars a month.
After a month -- and once they start thinking about that these rates -- -- grow up.
And there will be -- -- eleven in process you you think of these markets.
As a result well I think -- the rates are gonna go up until there's more confidence in the economy.
So that your rates don't necessarily have to hurt the stock market at this point.
In fact measure if you're suggesting I mean.
When that happens that's going to be an awful -- signal about how strong this economy really that is.
Or Harris it's always great to have you expects the baction.
