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-- economy right now in the midst of all those at a critical state what is wind was impact going to be on our economy Tom Higgins chief economist at paid right -- joining us now and -- what do you think Tom do you think that's one close to have a negative impact of folks gonna stay home not travel this summer.
A serious situation but I I I don't believe that they'll be a serious economic impact on the US economy at this stage.
I think you're talking about a hundred people that we've we've heard reported this morning out of a country of 300 million people.
So at this stage really it's premature majora any conclusions about what the impact on economic activity.
Will be but potentially I guess it could have some kind of an impact at this stage I think it's.
-- Yeah -- the obvious suspect would be travel travel related industries and you know we talked a lot of people in that industry and they're all worried.
But doesn't have an impact our people this -- -- -- talk about it the water -- but go on their vacation anyway.
I would I would think so Tom I I I really don't think it at this stage that we have to be terribly concerned about -- economic impact whether it's in terms of tourism more.
Or travel more generally but it's something to keep an eye on I mean I think there's bigger things in the economy right now that we do have to be concerned about whether it's today's GDP report showing the worst two quarters since 195758.
Or the rising unemployment bank -- the bank stress -- there's a lot of other things other than Swine Flu which is capturing headlines right now that we have to become.
And in Japan but Jim the GDP though I mean we've got a market that's -- I -- 47 right now despite that.
-- the reason the markets rallying is because a lot of the decline was businesses ratcheting down their inventories.
Where is personal consumption was better than expected so what they're saying he's -- visits and I'm gonna have to resupply inventory and give it.
A boost -- growth of what I'd like to ask is if a thousand or or or or a hundred days is not significant number at some point the national psyche gets affected and starts to affect travel and vacation.
Where would you where would you what's the number that you say would would would would would have start time and economic effect in terms of the number of people have this disease.
I think that's that's very difficult for me as an economist to really say I mean you got to see some kind of an impact where you -- school -- perhaps that's what's going out of Mexico Mexico it's clearly going to have some kind of economic impact on consumer spending or on travel etc.
Top but right now in the United States we're not at that stage so it's certainly premature here by the award elevate to say the number of cases that we're seeing in Mexico then maybe you would see more of and he can aren't on your.
You've got to keep him but I want to ask you about the Fed meeting this afternoon Tom because -- got the -- coming out at 215 there between zero point 25% they can only move anywhere.
But at the same time they could signal to us they're going to be buying our treasuries what do you look imported -- to fifteen.
That's exactly what I think they're gonna say -- I think they're going to announce that they're gonna increase their expansion their purchases of treasuries from the 300 billion that they announced on March 17.
That's something more than that -- what we've seen.
Since that march 17 meeting is that we saw a ten year treasury yield.
Drop from 3%.
Down to two and a half percent and then rise back to 3% on concerns of all this.
Increased issue it's associated with the bank bailout.
And the fiscal stimulus that the Obama administration -- so I think what the Fed needs to do is bring those rates back down in order to lower borrowing costs forbidden says in order lower borrowing costs for consumers.
Cause we're not out of the woods yet as today's GDP report showed.
You know the ten year treasury broke through the 3%.
Barrier and people the trigger the credit markets say 3.2 five is when you start -- the fire engine red.
Right and what that in other words that the Fed really have to start moving to buy more treasuries to keep the long term rate low what is your panic button benchmark here for the ten year treasury.
I think it really is 3% because.
The Fed when they initially stepped in treasury yields there were somewhere around just north of 3% I think -- three point 06%.
On ten year yields.
And sell -- they allowed to break through that mark the market's gonna test them.
And then push it higher in order to see where the Fed will step and so I think the -- really gonna have to -- -- draw a line in the sand there.
Drive treasury yields backed down today by announcing an increase in the -- Program to double to wait it out of that but Tom that's exactly what they did last time they announced big buys them for treasuries.
And they thought that would drive breaks down but like you said that the longer you go out that yield curve gets deeper it did it did not do what they thought it would do.
Well of blitzes we we don't know what would've happened had the Fed not stepped in -- -- -- perhaps treasury -- would be hit three and a half percent right now on tenure yelled.
But instead we've remained.
Below the 3% mark where they -- that initially so at this point you can't really judge the success of the program we know that initially they did rally quite a bit and that they haven't broken through the previous the previous level from above the 3% three point 06%.
That time I thought marks on it right away and actually that there tour Tom -- campaign right now Tom thank you -- thank you very.
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