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And interest rates well as we've been talking about all day the Fed's decision not to begin tapering.
Sparked a huge equities rally -- both the S&P 500 and the Dow hitting new intraday -- -- Will this just make it harder for the Fed to really begin tapering down the road joining us now Michael.
Economist and senior VP of Dallas Federal Reserve Bank.
And William O'Donnell RBS head treasury strategist we had a guest earlier saying.
It felt like the Fed had panicked.
And that they're too worried about all that swirling around instead of what Wayne Angel in the last hour said he's a former federal insider.
He was saying that you know what things are looking good enough to at least start tapering mr.
O'Donnell do you agree with that -- of fed -- just take for ever to do this.
Well I'll tell you what we are just having that conversation before I walked in here and it it it does open up that question when is tapering going to end.
Because if you presume as we do that the first tapering is likely to be at one of the quarterly meetings where the Fed Chairman has a press conference -- The next window is December and it's December 18 and that's right around the time.
Where the fixed income markets are essentially shut for the -- So you know what the Fed it's essentially -- How are you gonna make that made fourteen target date where their proposed earlier that -- -- -- you know the media QE3 program.
They're gonna have to come with some significantly large.
You know withdrawals.
Stimulus in order to meet that -- fourteen -- I think the reality is is that I -- -- what economists are likely to do.
Today and in the near future.
It's move out the date for the end of -- and end of QE3 and perhaps the date for the first tightening from the middle of fifteen to the end of fifteen.
Michael don't doesn't the Fed and I didn't hear them asked this question during a press conference today.
But don't they have to answer for for getting it wrong consistently getting it wrong on their growth predict predictions.
They have consistently said it's going to be 3% above they've big time after time been wrong on this.
The question becomes it's sort of like President Obama complaining about income disparity under his watch they are complaining about growth problems under their watch.
Why continue with a policy.
Which is not helping our overall growth situation.
Good question I think really it's -- describe this policy is one of cowardice.
And cronyism is cowardice because the Fed is afraid to let the market do its natural -- natural self healing process.
The economy goes through that as one of creative destruction that that is keeping interest rates of artificial -- 237.
Years each year lows.
Propping up the stock market trading a bubble and afraid to back off on it because they don't save anyway are you saying that the stock market is.
A bubble itself.
Absolutely and not done work on that good to see the relationship between interest rates in the stock market went -- found.
Is it over a 117 years of history of the Dow and in interest rates is one percentage point that is hundred basis point movement upward.
And -- and interest rates calls as of nine and a half percent decline in the market we've got about 20% bubble.
That might not look a little bit so so would you would have stood side by side with Esther -- and said I dissent on this decision not to taper.
You know -- go far beyond that I would say look we need to stop sucking up all the attention in -- that the economy can't do anything good.
Without -- government of financial officials there's too much attention to us when -- when we know that the real growth in the economy doesn't come from us anyway doesn't come from government.
It comes from the people out there who start businesses and create jobs well it well let's trust that they have that there are strong and that they and that the resilient -- let's talk about the average people let's get away from -- Wall Street for -- the average income in America is stagnant.
So what's the poverty rate by the way it has not improved at all if in fact there are some indications getting worse.
And that means that even with -- very low inflation of 1% between one and 2% it still means that that -- the income.
Of Americans is going down.
If you have stagnant income and a little bit of inflation that hurts the average American how much longer can they stand that.
Well I'll tell you what it seems like the defense can't stand it at all if you look at the personal incumbents spending data that we got.
What week and a half ago it was very very -- the consumption data.
It's really one of the reasons why they've been out on on the Fed has been unable to achieve orbital velocity for growth.
I think bit defender has blamed it on to you know fiscal headwinds and while that may be true.
The fact is he did -- -- -- fiscal -- -- and it's left.
This is -- consumption based Kent State economy consumption is roughly 70% of GDP eight.
They've got to get real incomes in wages and salaries up and right now they're lower than they were in the day in 1989.
Well that you both will not -- -- definitely many bright points but so are the markets as we see down.
You don't fight the tape you don't fight the Fed didn't -- doesn't -- today not a question is what happens -- -- will deal that coming next Michael Cox William O'Donnell thank you very much.
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