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And that was of course Fed Chairman Ben Bernanke -- wrapping up his Q&A session what really -- the markets.
Last month's fed minutes were released this afternoon I gotta tell you this beat the tar out of that in terms of information.
The Fed is signaling it may start to -- the bond buying program as early as the end of this year.
So -- for the street tomorrow what does that all mean our power painter is here to break it all down we've got.
-- -- -- young with S&P capital IQ.
I have a lot more information -- that and there were in the -- it's maybe because it was more spontaneous Peter let me start with you.
One thing he said that was interesting was that he thought that the unemployment rate of seven point 6%.
Understates how serious employment situation is or overstates.
The recovery basically doesn't represent what's really going on out there it's worse than what we thank you -- without.
Yeah -- said many other things that support that the notion that the economy is going to need.
A lot of liquidity and -- and a monetary ease or an expansionary monetary policy.
But quite a long time.
-- -- The markets have misunderstood.
His statements about -- quantitative easing.
Quantitative easing has a lot of negative side effects he's not gonna talk about those but they -- well documented their well discussed the profession by people across the spectrum.
Stood -- like to do a ship this process is supporting the economy.
Away from quantitative easing to the other instruments and I think he believes that the economy in the recovery is resilient enough.
To accept that.
But no time soon are we gonna see.
The federal funds rate rise above near 0%.
-- he wants to shift to what other instruments what do you think he wants to give Peter well.
Already he's got the that that the federal funds rate near zero right and I think that they can continue that -- -- to use that.
And perhaps the rate of interest they pay on on on bank deposits at the Fed and so forth to adequately support the economy.
Just as we were able to scale back.
From the L level of stimulus the federal budget and -- and not have the economy.
You know slow down be it apparently okay we probably can start to scale back.
Quantitative easing would out of bidding it completely remember he's talking about reducing the rate over a period of time yeah and not have negative effect.
I don't know that let me go out so much I I want to get your take on that do you agree with that -- as far as using of the other instruments.
Like he's taking his bag out don't did upside down on the table and used everything in there.
-- -- -- -- Yeah I mean -- take away today think he was he was published on so -- happening out that the unemployment rate.
You know understates how bad the job market -- sends a signal to mark he's not -- as big a hurry is people bought.
To do any tapering is seeing the futures.
You know move up on that so I think this is Barry got commentary from the chairman it's it's bullish for the stock market.
Peter another thing that he's sad it was -- be nervous about its inflation.
You know he talked about how the inflation rate is much below what their target is -- in the past -- set things like that.
It feels like he's maybe making excuses for why they can keep.
This kind of policy going and going going but but this to me have a little bit different town where he was talking about boy I wish we could spark a little inflation here.
For our audience who may not know why would we want more inflation -- do you think that's the way to go.
Well it's important to remember that we are having asset inflation.
Which doesn't get measured by the CPI for example rising housing prices -- but we're not getting goods and services inflation.
Economists and I'm not agreement with the profession on this economists seem to think that deflation is inherently a bad thing.
We are not in deflation but where were close to zero what time going -- in deflation and on that we need to do worry about the floor on prices just yet.
And this is part of the switch in policy -- by pulling out of thought of quantitative easing he start to take away some of the support for.
Inflated agricultural land values.
Moving into the housing market as they have creating shortages of housing in some markets while prices rise and folks can't -- Those are some of the negative effects so he's really not dealing with quote just one inflation he's dealing with several.
And the one that people focus on the CPI is relatively subdued.
He's concerned about that going too -- but he's got to be worried about -- on an asset markets that's why the shift.
That's why pull back from quantitative easing the extent he can get away with -- and just rely and the other tools.
And I'm not sure he's trying to get away with it I mean it it seems like I agree or the interpretation that he seemed very damaged out let me ask you about the -- he made about the volatility we've seen in June was interesting.
When he talked about sort of the comments that fed the Fed made.
More clarity as to when they might be reading the market he said but it's great what we -- from next forgetting about -- the wave basically.
It's -- better to have the volatility now we've avoided may be having it later do you agree I think that was right you think you yeah that is accurate.
I mean I think on the one hand some policy makers -- it might have been taken aback by the pretty violent move that we saw in global markets a lot of overseas markets were hit much harder than we were.
On a tapering worries but you know.
To bomb Bernanke's point today I think there's something to be said for getting the news out there.
You know that does help get it discounted into the market and and reduce any future.
Shock effects but my overall on tape today would be that you know it's very much a data dependent call.
And the majority of members on the Fed are not ready to begin tapering until they see.
In the in the job market.
When does that reduce the effect really it and Peter what do you think about the move that we've seen in the ten year.
I mean to yield rose yet again today it's sitting at two point 68% they haven't even done anything yet what is the bond market telling us Peter.
But the bond market is anticipating some lessening of quantitative easing whether that continues after today's remarks remains to be seen you'll find that out tomorrow.
However I would point out to you we haven't seen any great negative effects.
Because of the Treasury's going up and the and the mortgage rate going up.
This such a thing their child has a fever she give it to saint Joseph's aspirin -- the way to bottle says that you know for a while there women giving the child sex.
And we don't need to do that on a continuing basis what's more they can have deleterious affects.
To some extent we just don't need to be giving the economy as much of a jolt as it's been getting for monetary policy.
But the markets don't believe that that's part of his conundrum.
Now -- act -- an hour at 85 billion baby aspirin so it's -- to be a lot of Fremont general or we've got this big bill I hate.
Critics -- all of us gentlemen thank you so much for joining us appreciate it and you next.
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