tv Cavuto Coast to Coast FOX Business July 10, 2019 12:00pm-2:00pm EDT
lady gaga could be headed to be a billionaire. stuart: that is fascinating. amazon is back well above $2,000 per share. 2017 to be precise. that's it for me. time is up. neil, it is yours. neil: stuart, thank you very, very much. all eyes on the federal reserve as jerome powell continues his testimony before the house financial services committee. a lot of people are talking today. the president is tweeting the we'll hear from the labor secretary of united states, alex acosta, in his role in the early epstein cases but probably the most consequential development of all the bigwigs yapping today, would be the federal reserve chairman. he sets interest rates. some say he is the lasted a adult standing in the financial community. that is a matter of opinion but we're going to be living on this, staying on this, what he has been saying. we have cut away here. i wanted to let you know has talked about the tax cuts have to be measured longer term on their impact, not just the near
term. he talked about a weakening economy, headwinds developing enough to trigger optimism in the financial community that he is going to cut rates at the end of this month. maybe not by a half-point a lot of people saw happening, maybe a quarter point, just in the course of his testimony, one of the fascinating things i discovered there was about 60% probability we would see we could see a cut in rates by end of this month. when it came to half-point cut down to 16%. but again the expectation is that a cut is coming. he is he is making the case for such a move. he is not telegraphing additional moves. we want to say on this, give you a flavor what is happening here. democrats on this committee have been pouncing whether he feels pressure from the president of the united states, that he should essentially do his bidding to cut rates. he has said no, he doesn't think the president can fire him. by the way the president can't fire him or demote him.
leaving that aside he stood very strong on the idea, i move based on data. but it's a comeuppance for him to have to essentially agree that the president of the united states was right to say he overdid it on interest rate hikes. that he might have to give one of those back by the end of the month. realize that, importance of this, riveting for some folks, it is important for you to listen to the most consequential figure in the financial markets. the chairman of the federal reserve before the house. let's listen. >> mr. chairman, 2020 is less than six months away. yes or no, will we have faster payment system by then. >> no. we'll not be done by 2020. but we're working there. >> access to settlement services will help level the playing field, enhance competition amongst providers of faster payment services. yes or no, is this a issue of accessibility and equality? >> i do agree with that. that is one of our principal
motivating factors. >> would the fed like to see a world where all americans have access to faster, secure payments? >> yes we could would. that you mentioned that report. this project has been going on five years. >> if you can instantly clear payments between the accounts of commercial banks held within the fed, why not consumers writ large? what is the delay? >> it is not -- it is a service that hasn't existed. it existed for banks, immediately available funds existed for banks. we really, we don't have plenary authority over the payment systems as some other central banks do but we convened a group of people, institutions, maybe five, six years ago, we said let's work toward this. that is the report you saw was i think the last report that we issued. we're now working to implement some of the recommendations. >> mr. chairman, trying to better understand the delay in the implementations of this report. have you received any pushback from any businesses particularly
the credit card industry? >> you know i think, i think we're determined to do what we see the right thing as. we're not looking -- >> have you received any pushback specifically from the credit card industry? >> i have not personally, no. businesses advocate for their own well-being though. >> sure. do you agree that our country's continued lack of a real-time payment system is being exploited by credit card companies like mastercard and visa? and also, outside of that industry by facebook, to create a digital currency? >> i wouldn't want to use those terms, no. i think people operate in the environment they have. we're trying to create an environment that does have faster payments broadly available, we think that is better environment for the reasons you articulated. >> yeah. i do see a faster payment system simply as public good. the lack of action here creates a real void in the lives of consumers everywhere. these voids are increasingly being exploited by companies
looking to operate as financial institutions without the guardrails. facebook's libra is being trotted as a solution to the unbanked however i struggle to see how seeding functions of senbanc to private company. we should use preexisting infrastructure to insure all people safely securely, with no cost, access and move their money, 24/7, 365 days a year. let's not lose sight of the plot, mr. chairman. the plot is the american people. hope to see your organization become reflective the experiences and everyday needs of americans. thank you. i yield back. >> thank you. the gentleman from wisconsin, mr. duffy, is now recognized for five minutes. >> thank you, madam chair. mr. chairman, on your left-hand corner, welcome. one of my colleagues in the statement said that the president has implemented
harmful economic policies. in your assessment i think you said the economy is doing quite well, is that correct? >> yes, i would say the economy has performed, i said reasonably well so far this year. >> last quarter was 3.1% growth, pretty, pretty great, isn't it? >> you know, just, if you take it through the middle of the year, we'll have growth probably in the mid 2s. yeah, that is solid performance. >> great. where i come from obviously we like our rural communities to grow as well as our urban communities but by and large the biggest complaint i hear from my employers is that they don't have enough labor. they can't get people in to their shops, to fill the positions that are open, and there are some come in, they don't actually want to work, which leads me time my graduation. i will not go with you, we have problems in immigration but
there is competition for labor. when there is competition for labor, don't you see salaries rise, hourly wages rise when there is competition for labor? >> yes. >> or am i wrong on that? >> it is very interesting. we have seen wages moving up and we do hear lots of reports like what you just said you know, labor shortages and can't find qualified people. we would have expected to see wages move up, they are moving up at a healthy level on average a little more than 3%. that's a god thing. yeah, you would want a tight labor market to produce solid wage. >> is this a fairly tight labor market? >> it is by almost every measure. i would say that the thing that doesn't really show is the wages which could be higher. >> in a tight labor market, if i have a person who is making 12 bucks an hour, but they're worth $15 an hour, what do you think happens? no well, in a, in economic theory they should be earning $15 an hour. if the marginal product is $15.
>> they will leave one job, go to someone pays them 15 bucks an hour, right? everyone is looking for labor. if a guy making 15 bucks an hour, only worth 11 what happens? might get fired, right? >> yeah. >> or he might automate. the markets work to pay people the value of the services that provide, company, especially happens in a tight labor market. which i know you won't make a point on 15-dollar minimum wage. my concern if we increase that too high, we have people aren't worth, aren't added value of $15 an value, they will lose their jobs, fall into deeper despair. that is my concern. with regard to, with regard to trade you're not comment, i know on the policies of the president with regard to trade but you look at our long-term horizon,
you mentioned debt, the problems we're going to have, but with regard to trade if we have countries that will steal our technology, so you have a company that invests $500 million in a new technology and someone steals it from you, has to pay a hacker in a basement, then you come to market with the same product at zero cost versus your 500 million, how do we compete in the long run with that environment? or if you have a country that manipulates their currency to make sure we can't have some equalibrium with regard to our trade, how do you deal with countries like that but for the policies that the president has pushed? >> those are entirely appropriate considerations for those who have responsibility for trade policy. >> would it concern you for the long-term health of the american economy if people are stealing our technology, or cheating us, or manipulating, would that concern you? >> i have to say we are very
unusual in democracy that we have this independence, that we to do our jobs. i think that means we need to stay in our lane. i try very hard not to get into things we're not responsible for. so i'm just going to have to say that. >> so with regard to someone mentioned corporate greed, we want to see companies and individuals behave responsibly and honorably but we also want them to make a profit, right? do you have an objection to companies and individuals making a profit? , making money? >> we do have a market-based system. >> if they make too much, that a problem for you? >> it is not -- >> how much is too much? >> not for us to judge. >> okay. so, do you support a market economy? think it's a good thing? >> i think our economy has been market-based. i think that served the public well. >> probably the greatest economy existed on the face of the earth, fair to say?
>> yeah. >> i yield back. >> miss alexandria ocasio-cortez, the gentlewoman from new york is recognized for five minutes. >> thank you, madam chair, thank you so much, mr. powell for coming in today. the federal reserve's mandate, one of their mandates is maintain price stability and maximum employment, is that fair to state, to say? >> yes. >> and, a lot of folks would interpret that to aim for lowest unemployment rate possible without runaway inflation, correct? >> yes. generally. >> so i kind of wanted to dig in today a little bit, about relationship between unemployment rates and inflation. in early 2014, the federal reserve believed that the long-run unemployment rate was around 5.4%. in early 2018, it was estimated this was lower, around 4.5%. now that the estimate is around
4.2%. what is the current unemployment rate today? >> 3.7%. >> 3.7%. so what we had previously thought of, perhaps, as far back as 2014, as long-run unemployment rate is around 5.4%. we're currently 3.7, lower than that estimate. but unemployment has fallen about three full points since 2014. but inflation is no higher today than it was five years ago. given these facts, do you think it is possible that the fed's estimates of the lowest sustainable unemployment rate may have been too high? >> absolutely. >> so we overshot in what our long run unemployment rate is? >> i think we have learned, as you pointed out, i think we learned that, you, something you can't identify directly, we learned it i lower than we thought, substantially lower than we thought in the past. >> i've seen lately economists
are increasingly worried that the idea of a phillips curve, that links unemployment and inflation is no longer describing what is happening in today's economy. have you been considering on that, what are your thoughts on that? >> very much so. we spend a great deal of time on that. the connection between slack in the economy or the level of unemployment and inflation was very strong if you go back 50 years and it has gotten weaker and weaker to the point where it is a faint heartbeat you can hear now. you still see it there. at state level data, things like that but i think we really have learned though that the economy can sustain much lower unemployment we thought without troubling levels of inflation. i think we, i would look at today's level of unemployment as well within the range potential estimates of plausible estimates of what the natural rate of unemployment is. >> so why do we think that we're seeing this decoupling in a relationship that we had seen in the economy in decades ago? >> it is, so, one reason is just
that inflation expectations are so settled that, that's what we think drives inflation, that for example, when unemployment went way up, you didn't see inflation go down. >> light. >> so you don't see, you don't see inflation reacting to unemployment the way it has because inflation seems to be very anchored. >> do you think that could have implications in terms of policy making that there's perhaps room for increased tolerance of policies that have historically thought to have drive inflation or increase inflation? one of the argument about minimum wage or, other policies that directly target middle-class americans is that they could drive inflation. do you think that, that decoupling is something that we should consider in modern policy considerations? >> yeah. i think, again i wouldn't want to get into the minimum wage discussion directly but i think we've learned that inflation
really downward pressure on inflation around the globe, and here, is stronger than we had thought. you see countries all over the world not getting, being below their inflation targets. whereas when i was young they were always above. now they're always below. the united states has done better than other countries. we're still below the target. >> i have one last question. earlier you had suggested that in the event of a recession or a contraction we like to see more fiscal policy that supports monetary policy. can you further articulate what some of those fiscal options and considerations should be in terms of specific options we should consider? >> i was referring really to severe or significant downturn. if that were to happen then i think it would be important that fiscal policy come into play and that -- they're automatic stablizers that happen but in addition things were done at the
beginning of the financial crisis in terms of spending increases and tax cuts that helped to replace the demand that had been lost in the private sector and get us through a really rough patch, something like that but those are things i would reserve for pretty severe downturns. >> thank you very much. >> thank you. >> mr. barr, the gentleman from kentucky is recognized for five minutes. >> thank you, madam chairwoman. chairman powell, thanks for coming back to the committee. i thank my colleague, challenging the credibility of phillips curve. without quibbling about the details i think you're doing outstanding job, chairman powell. i want to appreciate much improved communications with congress about the direction of monetary policy. so i do want to take up the issue of fed independence. so much is made in the media of president trump's criticism of
fed policy in recents and reference to quantitative tighten, criticism of so-called quantitative tightening. many members of this committee, especially on this side of the aisle criticized your predeceases for overly accommodative monetary policy for an extended period of time, so-called quantitative easing. so what i want to just say is that my view is that all of this feedback, from both the executive branch and the legislative branch is a necessary and constructive part of oversight and simply part of holding the fed accountable and that it in no way compromises fed since you and other governors are given 14-year terms with, with provision that makes you removable only for cause. do you agree or disagree with that? >> i would just say it this way, that we're completely and totally focused carrying out our jobs and nothing really will distract us from that.
our accountability in our system does lie with this committee and with the other committee on the senate side. so you have oversight over us. in a lot of other systems it is the finance ministry. but in our system of government is congress. >> my only point criticism from congress or the president does not in my view in any way compromise your independence. mr. chairman i heard economist arthur laffer say over the weekend that the fed really doesn't set interest rates. that it follows interest rates. i thought this was interesting comment in light of low long-term rates and inverted yield curve. has the case for lowering the fed funds rate because the fed is following rates as opposed to setting them. >> i wouldn't say that i didn't see that comment so i can't react to it. i wouldn't say quite that way. our focus is on real economy values, in particular maximum employment and stable prices. we use our monetary policy tools to achieve that we know that our
policy works through financial conditions. we look through a broad range of financial conditions. they do matter for us. if there are big changes in financial conditions and they're established for a period of time. >> where are we today in terms of the proximity of the fed funds rate to the neutral rate? >> that's another one where we can only estimate the neutral rate as you well know and it is interesting, estimates of that have come down as well. i would point out that we publish the medians of the in our summary of economic projections every quarter. we publish the medians of the committee and that number has come down by 50 basis points since september of last year. so the median estimate is 2 1/2% nominal which would be a half a percent real. where it was 3% back in september. so we're learning, we're always learning about the natural rate of unemployment and the about the neutral rate of interest. right now understand that it is
estimated within fairly broad uncertainty bounds. >> as you know i've been critical of previous fed positions or policy that i would characterize as overly improve visionizational. as you communicate and forecast where fed policy is going, and you talk about in your testimony the case for a more accommodative policy, that argument is strengthening. i appreciate that because i think it is ha bit waiting the markets as opposed to surprises, that is good for our financial system. last question, you cite in your testimony uncertainty of trade veriments perhaps one of the reasons why the case for more accommodative policy has strengthened in recent months. what would passage by the congress of usmca and enactment of usmca do in terms of the overall economic outlook and also the future trajectory of monetary policy? >> i think it would remove
uncertainty about, about our trade policy with mexico and canada, to have that pass. i think that would be a positive thing. of course i wouldn't comment on the particular merits. it wouldn't be appropriate. the passage would remove uncertainty. i think that would help in the current environment. >> i do actually have one final question and that is, you had responded to my question about the surcharge, the proposal to simplify capital requirements for banking firms intigrating a banking firm supervisory test results into regulatory capital requirements where are we on that? >> moving forward. working on it. working on night thank you. i yield back. >> the gentlewoman from virginia is now recognized for five minutes. >> thank you, madam chair, and thank you chairman powell for joining us today. chairman powell, do you think the u.s. should go back to the gold standard for our currency? >> let me say i wouldn't, this
could feasibly considered commenting on a particular nominee who recommended that. of course i would not do that. i will answer your question but i want to make sure that this is not interpreted that way. so, no, i don't think that would be a good idea. the idea congress would have to pass a law. that law would say that our job with monetary policy is to is to manage the level of the dollar, stablize the dollar price of gold. we would then not be looking at maximum employment or stable prices. there have been plenty of times in the fairly recent history the price of gold has sent signals that would be quite negative for either of those goals. so i don't think that is something that would be attractive. no other country uses it. >> because it is much more volatile, linking it to gold would be very volatile or could be? >> really it is not connected or -- you have assigned us the job to direct the real economy objectives, maximum employment,
stable prices. you assigned us to stablize the dollar price of gold, monetary policy could do that but the other things would fluctuate. we wouldn't care. we wouldn't care if unemployment went up or down. that wouldn't be our job anymore. i think that would be difficult -- >> that is not a positive mission for the fed. >> sorry? >> much better mission for the fed is what you're doing right now? >> this is why every country in the world that abandoned the gold standard some decades ago. >> okay. well that is reluctance or that desire not to go back to the gold standard is something that you have in common with the ceo's of the seven of the world's globally systemic important banks who were before us in april and said the same thing but it is worth noting that last week the president nominated judy shelton for a seat on the fed. she is similar to of is other would-be nominees, she does favor a return to the gold standard. i assume from your earlier answers that you don't share
that view? >> i don't share that view but i would not comment on the views or any particular nominee. we do not play a role in the nomination process. it is totally up to the president and senate we are completely on the sidelines there. >> okay. my concerns about miss shelton are not just her questionable views about monetary policy but she also seems to be by most accounts a political opportunist who thinks low rates are bad under democratic presidents and good under republican presidents. an that i would, i would caution concern when, when looking into the nomination and confirmation of this candidate. i do want to talk for a minute about debt. there has been a lot of questions about it. in particular the debt ceiling. on monday the bipartisan policy center projected the u.s. treasury could run out of money by early september if congress doesn't raise the debt ceiling.
that is because the government brought in far less in corporate tax revenues than, this year than was projected as a result of the tax cuts because you know, spending is only one side of the ledger, right? we need to look at revenues. and there is a possibility that the u.s. could default on its debts. what would our, what would congress's failure to raise the debt ceiling what would that mean for the u.s. economy? >> i think it is essential that congress raise the debt ceiling in a timely way so that the united states continues to pay all of its bills when and as due. i think any other outcome is unthinkable. we never failed to pay our bills when due. so, i assume, and believe that the debt ceiling will be raised in a timely fashion. >> what would it mean for the economy and to interest rate if we fail to do so? >> i think it would be very uncertain territory if the united states were to stop paying its bills, it would be, i
wouldn't, be able to capture the range of possible negative outcomes from that. the loss of confidence in our ability to run our fiscal house it could be substantial. it would be a lot of uncertainty. i just think it is beyond contemplating that. >> well, yet we must contemplate it, mr. chairman. thank you. and i agree. i want to encourage leadership on both sides of the aisle and both chambers of congress to not wait until the last minute to make sure we raise that ceiling. thankthank you. yield back. >> thank you. mr. guden, gentleman from texas, recognized for five minutes. >> thank you, madam chair. chairman powell, the board has done a great deal of work with foreign banking organizations but i'm concerned there is lack of harmonization across jurisdictions with respect to these foreign banking jurisdictions. i want to make sure you all are working to insure that our u.s. firms are not disadvantaged in
the foreign marketplace, could hear a little more about your plans for that? >> so i think, here, we we want fair treatment and to foreign institutions. we expect that we will get that from foreign jurisdictions. why we give it here. plus we want foreign institutions to come in and do business here and lend to people, take part in the capital markets. that only helps our economy. we want our institutions to take part in foreign economies. many banks work across international lines now. so it is essential that there be fair treatment for, you know, non-native banks all around the world. >> thank you. i appreciate that stance. also in your written testimony you mentioned trade tensions and slowed global growth as potential threats to the u.s. economy. between these and debt ceiling and the lack of consensus in
congress, what would you say are your biggest concern out of those? >> out of those i really think that the most important things is the, what we've been calling the crosscurrent which are the, really trade tensions and concerns over slowing growth, global growth around the world. those are inner related. there is a box in our monetary policy report i recommend to you about slowing global growth and manufacturing an investment which is something we're seeing not just in the united states but around the world. that is the thing that weighs on our outlook. we see it here. we see weak manufacturing here. we see confidence surveys among businesses. fortunately the consumer part of the economy is doing very well but that is where the weakness is. that is are with the concern -- other things are concerns too, but i would put those at the top of the list along with low inflation. you know, that is a concern to the other half of our mandate. we are concerned that inflation not run below 2% more persistently than we thought it
would. >> putting all that together, current state of the economy where you see us going, on a scale of one to 10, how would you rate where we are with respect to an economy, one being bad, 10 being great? >> i don't think i will give you an actual grade but i will say this, we are in the 11th year of this expansion. that is a first since we began to keep records on this. we're at 3.7% unemployment. that is a 50-year low, 50-year low. we've been there for 15 month. there is no reason why that can't continue. we're committed to using our tools to make sure it does continue and i would just again point out that this expansion is now reaching groups that hadn't been reached in the first few years. there is a box on that as well in the monetary policy report. all the more reason why it is so important that we keep the expansion going to the maximum extent we can. >> i agree with you. i thank you. i yield my time back.
>> thank you, madam chair. thank you for convening the hearing. mr. powell, thank you for being here for your thoughtful testimony and you and the rest of the board of governors have a very mon you -- monumental task and i'm heartened you are maintaining independence and not allowing yourself to be bullied. let me put a couple things on the record. we had a lot of discussion here about the cbo report and minimum wage. i just want to add something else to the equation. that is, that yes, there has been some discussion about losses but, i think we need to consider the fact that raising the wage will elevate 27 million low-wage workers. we really need to be concerned about the fact that so many people are really living at the
poverty level. a lot of those folks live in my state of north carolina. so when we look at the fact that we're going to raise people up, when we look at this $15 that we keep hearing about, i have done the math on it, it is about 55 cents a year. moving on, having said that, to a question about the unemployment, inequality in terms of black unemployment. the overall unemployment rate is about 4%. the unemployment for african-americans is about almost 7% in this recent bureau of labor statistic report, which almost doubles the unemployment rate for whites which is about 3.5% in the same report. let me, and these unemployment rates have been steadily falling since 2011.
so, what is, what if any analysis does the federal reserve do to evaluate the degree economic inequality affects the african-american unemployment rate? >> affects the african-american unemployment rate? as a feature of our, of our labor markets, african-american unemployment has often run at double. so that means, it comes down faster when, when times are good and goes up faster, twice as fast. so that is not, that is not a good feature of our employment market. >> thank you. >> what more do you think can be done to insure unemployment of minority groups gets as low as white unemployment? what role can the federal reserve play in reducing these disparities? >> the tools we have, actually there is a box in the monetary policy report that talks about
different -- it is not by african americans, it is by different levels of education which we can show but it talks about the disparate out comes for people. in terms of what we can do, i think. it dose back to taking seriously the job given us which is maximum employment. we're seeing in tight labor markets, african-american communities being reached by the jobs market in a way they haven't felt really ever, or certainly a very long time ago when we had 3.7% unemployment. it was the late '60s. which you and i can remember. not everybody here can. >> that's right. i'm a child of the '60s, i'm a baby boomer. i remember that. what is supposed to come out of the monetary policy review that happened earlier last month? were there any important take wais and will there be changes to the way that you and the board conduct the monetary
policy because of this review? >> there may be changes. we haven't decided that yet. we're just into the phase of taking a close look. we're really looking at the question, are there ways we can change our tool box or strategy or communications that will enable us to better serve the public? one of the key motivators for that is that rates are so much lower, we're closer to zero. that means we have less room to cut. are there ways we can, people have been thinking about this problem for more than 20 years so we can't to get the best thinking and come out of this with the best ways to serve the public with our tool kit. we may make changes but that discussion lies ahead of us. >> great. thank you very much for your service. and again, thank you for not allowing yourself to be bullied. i think that is really important in terms of the job that you're doing. madam chair, i yield back my time.
>> mr. williams, the gentleman from texas, is now recognized for five minutes. >> thank you, madam chairman. and thank you, mr. chairman, for being here today and just as a reminder, as you know, i'm a small business owner, main street america. very much interested in what is happening at the fed. i also want to reiterate my past statements about interest rates. even the slightest changes can have significant impacts on many parts of the economy. we both remember a time when interest rates were 20% and the principal balance for these rates compared to today was relatively low. when a new car costs $6,000 in 1970s, now the same vehicle can be $60,000. with principal so high, a slight increases to the interest rate can crush businesses with higher inventory costs with lower sales. we discussed this before you and i, i want to once again commend you for having a good pulse on
the economy and making the appropriate interest rate adjustments. before i begin my questions though i wanted to make sure nothing has changed since you last came before this committee. are you still a capitalist or have you undergone a drastic change of thought, now believe socialism would be a better economic system for our country? >> no drastic change. >> thank you. so yesterday in boston you stated if the stress tests do not evolve they risk becoming a compliance exercise breeding complacency from both supervisors and banks. you continue to say banks will need to be ready not just for expected risk but unexpected ones. you understand the importance of these stress tests to insure our financial system is resilient. even so i heard criticism that the fed's stress tests have been watered down fast few years to let biggest banks off easy. do you believe the stress tests are made easier since you took over for the federal reserve? how do these simulated stress scenarios compare in scale relative to the 2018 financial
crisis? >> i don't believe we made them easier. we have no intention of making them easier. we do have the intention of having them evolve though. i think we're 10 years into this. we've done nine cycles now. i think there is a risk if we don't can to init adapt to the markets, to the institutions to the state of the economy, they will become stale. people become complacent. you come back another 10 years. they have been very successful innovation, maybe the most successful regulatory innovation since the financial crisis. i think even banks would agree to that. so we intend them to be continue to be strong going forward. >> thank you. in february when you were in front of this committee i asked but the labor force participation rate, even though there are over 7 million job openings, as employer, it is heart to hire people right now. you mentioned factors keeping it 63%, skills gap, poor education
and opioid crisis. the fed has no control over any of these factors. we must deal with them here in congress. with that being said, have you noticed any of these factors improving, getting more people back in the workforce since you were last -- here in february? >> labor force participation, labor force participation rate has held up pretty well. there is a declining trend due to aging in the population. 62.9% now. that is where it was in late 2013. so that is a big gain against the trend. it's a good thing. more anecdotally, we're hearing a lot from folks who live and work in low, moderate income community, there are work opportunities. there are companies coming in and really want workers and they're going to look through some of the problematic things people may have had in their lives and hire them anyway. so that is, we think that is really healthy. in a tight labor market can, if you have a tight labor market
that lasts for quite a long time, that is what you're going to get. we do think that is a relatively new development, a very positive one. >> all right. according to the most recent monetary policy report consumer spending was down at beginning of first quarter, which you touched on earlier this morning. it appears to have picked up. i can tell you as a business person we've seen it pick up. what factors do you see as contributing to this turnaround? >> i think it is strong job creation. it is wages moving up. it's, you know, as you mentioned, tight labor market. it's workers, we survey workers. they say jobs are plentiful. they survey businesses, they say they can't find workers. that is a world where the worker, the family, people are it requesting their jobs. it's a worker, a world where they're feeling good about the economy, relatively. >> when you have more more jobs than workers, it has a tendency to drive up wages. we see that on main street
america. thank you for your service. appreciate you being here. i yield my time back. >> thank you, sir. >> thank you. the gentlewoman from pennsylvania, ms. dean is now recognized for five minutes. >> thank you, chairwoman waters, and thank you chairman powell for your expertise, your service and for coming in and explaining things to us. i learn a lot when i hear you speak. i thank you for that. i wanted to examine a little more closely some of the things you talked about, consumer side looking strong, the business side weakening. i want to compare that, and ask you what are some of the triggers to the weakening on the business side? as i look at the chart, trade policy uncertainty you said it is no question uncertainty is elevated. what would greater certainty look like? what are some of the things creating uncertainty? what would greater certainty look like? what would the impact be on the economy? >> we think the place where uncertainty is showing up in
business investment. businesses make invests. those have to work for longer party. when business become uncertainty, uncertain about the future, about future demand, they may hold off, they may decide to wait before they build something or buy something. they may hold off. what we're seeing, business fixed investment, which was quite strong. business investment was quite strong through most of '17, into' 18. it slowed down through the year. we connect that. there is no way to identify these things, we connect that to trade policy uncertainty and uncertainty about global growth, weak manufacturing around the world. >> what specifically in trade policy do you think is connected to that pulling back on investment? >> i think it is, it is just, there have been -- people who are responsible for trade and that is not us. we don't criticize them for what they do. we have broad series of trade discussions going on. if you, if you're a manufacturing company in our economy of any size, the chances
are pretty good your supply chain goes across-national borders to canada or mexico or china or vietnam or someplace. that supply chain is really part of the way you do business. you assume it is working. you can focus on your clients. when the supply chain is called into question, we hear this a lot from businesses, by the way. it is called into question, you pull back and you you have less certainty how this will work. you may have to change it. many companies changed their supply chain away from china now. >> because of the tariffs. >> have moved to mexico or vietnam now. so i think that uncertainty is something that we call out for the economy. but again i wouldn't want to suggest that that in any way is a criticism of those who are conducting the policy. we don't have a responsibility for evaluating that. that's for them. >> i understand. i appreciate your independence there. i'm hearing same thing on the ground from my businesses in montgomery and burks county pennsylvania.
uncertainty, fickle trade policy, fickle tariff policy, driving their conservatism in their own area. let me shift to something else you talk about. i care deeply about gun violence, opioid crisis, i'm wondering through your complex lens, could you talk about the opioid crisis and or gun violence? one of the recent reports on gun violence says gun violence in this country costs our economy somewhere in the area of $230 billion a year. and i know you are not involved in gun policy or the opioid crisis policy but through your lens, through your, the tools that you're using, what are you seeing? what could we in congress learn about how we could minute -- minimize that economic impact? >> i could do a little better talking about opioids where there has been great research including by the late labor economist alan krueger who sadly
passed away last year or earlier this year, about the effect of the opioid crisis. an extraordinary -- if you take prime age men in certain age groups who are out of the labor force, extraordinary percentage of them, the number was 44%, are taking some kind of painkiller. it's a big number. it's a big number of people on opioids. for the most part missing from the labor force. we all want the u.s. economy to grow faster, be larger, we want prosperity to be broadly shared. here are people who are in the prime working years who are on opioids. it's a national crisis. i know people are working on it. but it is out there. it is just, there is a human tragedy. there is also a economic motivation to get these people into the labor force where they can lead healthy lives. >> i appreciate that in terms of direct cost to labor. also if you think about the numbers, 72,000 people in a single year dying of overdose. think of the lost economic or
economic impact obviously to the individual family. then to communities, to their children and elsewhere. so i thank you very much for your work. and i always learn something from you. thank you. i yield back. >> thank you. the gentleman from oklahoma, mr. lucas is recognized for five minutes. >> thank you, madam chair and thank you for being here today again, chairman powell. you know, we've discussed many times the nature of my district. it is agriculture, it is energy, it is capital intensive. so the actions of the fed take, the actions the treasury takes has a very direct impact on my constituency. i'm very in particular sensitive about fed actions because my part of the world suffered the most at the end of the 1920s and the 1930s. before we became far more sophisticated how we handled these policies. you're the fourth fed chairman that appeared before this committee in this capacity since
i've been a member. there are just a handful of us on the back row who go all the way back to mr. greenspan and i found you to be as up front and straightforward as anyone can be in your position and in some ways really quite impressive compared to the things in the past. now that said, i also learned in my time to try and focus on things that matter to my people back home that would make a difference to them, even if sometimes it appears to be down in the weeds. i have a suspicion, very bright fellow that you are, you know where we're going with this next question but i have been raising issue of inner affiliate initial margin for nearly five years now. while regulators agrade the inner a affiliate initial margin requirements are issue to be addressed we've not yet been given any indication of timing. when in congress can we expect some action, chairman? >> i wish i could be here to
give you perfect clarity on that. neither i am completely empty-handed this is subject of inneragency discussions at the moment. i'm hopeful those will be fruitful. >> you know, chairman, like a bird dog on point, i would reiterate that the u.s. is the only g20 country to impose these initial margin requirements this has created what i fear is an unlevel playing field for united states institutions. i believe it is time we come to focus. so my second very respectful question, last month the basel committee on baking supervision agreed to provide a offset for client cleared initial margin under leverage ratio. bipartisan cftc commissioners support that. i'm looking forward to the fed and other prudential regulators implementing this global revision. can you give me a sense about the timeline on that perhaps? >> i will have to come back to you on that one. >> fair enough.
>> promptly you're following in fine traditions dating back to mr. greenspan. i state that respectfully. once again, one final question. i want to again voice my concern about the proposal. higher capital charges under scra will cause banks to pass causes on end-users engaged in otc transactions. congress clearly sought to provide relief for end-users as a part of dodd-frank. this proposal i fear threatens to undermined congressional intent and would deter end-users from engaging in risk management activities. i suspect you're aware of these concerns and i hope we will see them addressed, just noting from my perspective again, as a member of congress from the third district of oklahoma, the food we produce, the energy we provide, those resources need these kind of risk management tools because of the sheer capital intensive nature of the
businesses. so focus, mr. chairman. i know you will. i appreciate you very much. >> thank you. that last one i think you're probably aware is out for comment after a lot of work. >> progress, mr. chair. i like that. yield back, madam chair. >> thank you. the gentlewoman from texas, ms. garcia, is recognized for five minutes. >> thank you, madam chair, and thank you chairman powell for your endurance. we're almost at the end of the tunnel it looks like. i just wanted to focus a little bit on the widening in being inequality gap we've been talking about. i wanted to follow up on your answers to mr. lawson and miss asme. you said we've seen gains of pass decade accruing to the upper groups and passing lower and middle income groups. can you comment on long-term
systemic risks such inequality would introduce into the quality would continue on the present course into the future? >> i think the tradition has been or the history has been that people have generally been able to progress through time, be economically better off than their predecessors, their parents and grandparent that kind of thing and i think that's how people think about, have thought about about our system. i think the data show that is less and less true. it is still true for an. but true for fewer than it used to be but that's not good. we want prosperity to be spread as broadly as it possibly can and we want there to be progress upward for lots of people. we want mobility, from the bottom to the top, vice versa, we want the outcomes to be fair. so if you don't have that, what is the cost of it really? i think the costs are big.
that would include, you know, kind of a loss of faith in our institutions to deliver that in our society. so i think it is, a very important problem to address and i also, by the way, i see, i see lots of businesses and people coming around to that view that maybe weren't thinking that way five years ago. you hear that a lot. you hear a lot of discussion about this now in the business community. they see it in terms of good employees, things like that, in terms of people to buy their products. so i think this is a national problem. >> to go what happens to the bottom? i mean it is not as simple as haves and have-nots. if there is shifting the goal is always to move up, if you will, what happens to the bottom? do you all track and look at poverty rates? do you look at lower and lower income levels. people are going, representative pressley said are paycheck to paycheck? >> so, we do, and we, lots of
economists outside the fed -- >> i missed it. i didn't see any data on poverty rates or what it is doing. your book talks about, you know the inflation rate goal of 2%. unemployment rate as low as possible but what is the bottom that we can reach in terms of a poverty rate? >> i don't have a number for you. we have all the data, we don't put it in every monetary policy report, you probably saw the box that talked about, disparate labor market out comes for people with a lot of education, people with less education. >> what do you find unacceptable in terms of a poverty rate? before it skews everything else. >> in i positive number. >> any positive number? >> i think our goal should be not to have poverty. what is an acceptable number? there is, in our country, no amount of poverty should be acceptable seems to me. i know we have a lot of poverty,
if you asked me that question i would say -- >> that would be my goal. for others may not. i don't know if you follow the president wants to change the poverty line, how we index it to the cpi or the chain cpi. there is a proposed rule change. some people would rather pretend there is no poverty or they have done something to reduce poverty and changing the rules how to calculate it, doesn't get us anywhere. i just wondered if you looked at that proposal, whether you favor it or disfavor it? >> i have not looked at it. i wouldn't have an opinion on that. >> you wouldn't? i'm glad that you agree with me the goal should be zero. i worked with that my entire life. i think minimum wage increase would be step in that direction, number of other initiatives i hope we can get through congress. appreciate your time. thank you. >> thank you. >> thank you, madam chair.
yield back. >> thank you, the gentleman from minnesota, mr. phillips. is recognized for five minutes. >> thank you, madam chair. mr. powell, when you get to me you reached the finish line. my first question why is the u.s. dollar the world's reserve currency? >> the u.s. dollar is the world's reserve currency, there tends to be one, so if you're the country with the best institutions, the largest economy, the rule of law, and relatively open to commerce, a trading nation, you can be that. now, so what happens is, there tends to be one reserve currency. it tend to be a stable equalibrium. the pound was a reserve currency for many, many years but now the dollar has been for some time. >> so what do you consider risks
to that changing at some point in the future? >> it's a very long-run thing. it is, it is a fairly stable equalibrium. what currency out there would compete with the dollar? there would really, the euro or, it just, it is hard to see dollar not being reserve currency for quite some time. that doesn't mean -- there can be multiple reserve currencies. >> sure. >> there could be equalibrium where there are two or three and that would be fine but right now it is really the dollar. i don't see that under threat right now. of course in the long run it will come down to fiscal sustainability. it will come down to maintaining our rule of law and democratic institutions and pros pair being relatively open trading nation. those things are essential. >> in your opening remarks you talked about concerns with our high and rising federal debt. would that be a concern to the u.s. dollar maintaining --
>> in the long run, absolutely. >> second question, when you contemplate rate changes, how much rate do you give to the ongoing strength ever current economic data, versus forward-looking weakness implied bit inverted yield curve? >> you know we're, i think monetary policy is the all about the outlook we have very strong low unemployment and stable price stability. we're hookerring forward. monetary policy works with a lag. you asked about the yield curve and that's, that's something we do look at of course. because there is a message in there. there are a couple messages in there, you have to think carefully what they might be. it is not a single thing that is dominant financial condition. there are many, many things that we look at in financial markets. that is just one of them. but it is certainly one. >> okay. lastly, do you believe the federal reserve has the
requisite tools to fulfill the mandate at the clb without assistance ever fiscal policy? >> well, as i mentioned earlier, first of all we do have the tools that we have. we will use them aggressively. we believe they will be adequate. as i mentioned though in a severe downturn, there comes a time when, when, fiscal policy support is necessary and appropriate. one of those times was during the global financial so fiscal policy is very powerful and i think, you know, is important to have. i think for the most part, the fed can handle counter cyclical policy, but in a steep downturn, there will always be an important role for fiscal policy. >> so is the authorization to buy a wider range of assets at the lower bounds, will that be helpful or important or not at this time? >> i don't think we're seeking that. we're really not looking at that. we'll have plenty of treasuries
to buy if it comes to that. if it comes to buying assets, there will be no shortage of u.s. treasury securities. i don't think we're looking at -- you're referring to the fact that other central banks have the ability to buy equities, all kinds of different things. it's not an authority we are seeking or looking at or think that we need. >> okay. thank you, mr. chairman. i yield back. >> thank you very much. and so now we have the gentleman from california, mr. sherman. we're trying to honor your 1:00 time that we agreed upon and we are just running a few minutes over but we only have two. we have mr. sherman. >> i hope the chairwoman and the chairman, i thank you for your indulgence. it's been a couple decades in this room, i've watched republicans come here and condemn the fed for overly loose money and condemn you for
quantitative easing. i for one have been pushing in the other direction. it's interesting to see how with trump's -- i think one of our colleagues said the republicans seem to be in favor of loose money only when there's a republican president. the fact is that you haven't hit your 2% inflation goal and as we've talked earlier, it should be a 2.5% inflation goal because we have, and while unemployment is low, we haven't had the big wage increases. you've told us that wages have grown, but basically by 1% over inflation, which doesn't make up for 30 years of negative or stagnant wage growth in this country for those without a college degree. on trade, i've seen us reverse roles in another way. democrats voted against nafta
for china but now that trump is flailing at the trade deficit, i thaer hear an occasional democrat saying we should ignore the trade deficit. i don't think flailing or ignoring is the right approach. there has been significant discussion here about cryptocurrencies. this constitutes, cryptocurrencies, an attempt, i hope unsuccessful, to transfer power from the united states government to sanctions evaders, terrorists, tax evaders, while reducing the importance, as the chairman indicated, of the united states dollar as the reserve and trade currency. madam chair, i know we have an executive from facebook coming to join us but ultimately, it is time to bring mark zuckerberg here. he is the one that has made billions of dollars out of us, relies on the u.s. government to
protect his billions, and now wants to undermine the system, but i see his problem and that is he wants to invade the privacy of the average american and sell our data, and in order to compensate for that, he wants to provide privacy to drug dealers and terrorists, thereby establishing how dedicated to privacy he is. so i look forward to bringing him here, because the libra is an attempt to create a cryptocurrency that you could actually use to buy things. right now, we can kind of monitor the bitcoin, because to actually buy something, you need to convert it to the dollar. i want to shift to another issue. we talked last time you were here about wire fraud. we got 40 of our members to write you and we just got the
response today about the need for a name matching system so that when you wire money, you wire money not just to an account number, but to a name, because especially in real estate transactions, we've had a lot of people tricked into wiring money into an account because hacking and spoofing has caused them to do that. the united kingdom is moving to a safeguard system where, when you wire the money, you wire it not just to an account number but that you match it with a name. your response indicated that there would be some difficulty in doing that here. i know that we have state laws here that establish some rules, but you certainly have the capacity to regulate the financial institutions. you have regulations in this area. you could adopt regulations that say if you're going to accept a wire transfer, it has to be
wired to an account name, not just to an account number. how do you plan on addressing this issue where people are conned into wiring money into an account number thinking that's the owner of the property that they're trying to buy? >> we understand it's a serious issue and that it's something that they do in a very organized crime kind of way, hacking into, they can get a list of real estate transactions, they try to hack into the players and divert these payments. it's organized crime. you accurately obviously summarized the contents of that letter and i would say, you know, we have concerns about the matching name idea because it conflicts with some state laws. we think that really, the way to get after it is to get banks to have appropriate i.d. from customers but what i would propose, let me get the people who are the experts in this, to
talk to you and your staff. >> i would point out, this is clearly interstate commerce. this is clearly federal jurisdiction legal. we have granted you the power. please use it. thank you. >> thank you very much. the gentleman from washington is now recognized for five minutes. >> thank you very much, madam chair. mr. chair, thank you so much for staying back. i have a straightforward question. five days ago, the president of the united states said we have a fed that don't know what they're doing. so for the record, sir, do you? >> i would say let's take a look at the economy and let that be, you know, the report card. again, the economy's into its 11th year of expansion. >> the longest in modern history. >> since we kept records which began i think in the mid-19th century. unemployment is at a 50-year low and has been for 15 months. we expect that to continue. you know, i think inflation is
below where we would like it. as you know, we're concerned about uncertainties and other factors that are weighing on the outlook, looking at changing our policy, but overall, i'd say that our economy is on a solid footing. >> so despite disagreements you and i may have had in the past about the actions i think the fed should have taken, with respect to interest rate raises, i want to state for the record i do think that you know what you're doing. i thank you for being here. i thank you for your willingness and courage to stay independent. i thank you for your accessibility. you're only the third fed chair that i've had the privilege to work with, but you're amazingly accessible. and i thank you especially for your remarks earlier in conversations with various members, notably mr. stiverson, mr. perlmutter, regarding wage growth and in particular, not
being tempted to characterize recent wage growth as adequate, because it isn't adequate. as you know, i have been asking since i came to this committee when does america get a raise? it's long overdue. but it sets up a bit of a, as it were, dilemma for me. have you characterized here today that the cross-currents confronting the american economy are trade and global growth. i want to know why it is given that the fed and you have accurately pointed to the fact that our economy is 70% consumer-driven, why hasn't the fed called out more than a generation of lack of wage growth a threat to this economy? if we want to have a healthy economy that is 70% consumer-driven, we've got to have some decent wage growth and we haven't. we have to have a prosperous growing middle class and we haven't. so why doesn't the fed explicitly call out this lack of wage growth as a threat to the growth of this economy and the health of this economy?
>> well, i think we do. i think we have been trying to -- >> you were asked and you said the cross-currents are trade and global growth. the other cross-current, the other downward factor, is the absence of wage growth. is it not? >> i think it's really, if you look at the last -- go back to your point, go back to the turn of the century, what you saw was a decline in labor share. and that has not been reversed. so we're focusing on the change in wages but really, the level. wages are missing ten years of growth, so i think that's really the underlying problem. we're getting reasonable wage growth but we missed all of those years beginning again at the beginning of this century. i think it's a very serious problem and we should do a better job of calling it out. >> i look forward to you doing just that. phillips curve. there was a recent article in the "wall street journal" said
that in japan the phillips curve is dead. obviously, the connection as was discussed here, alluded to here earlier, has become more tenuous even in this country. i would posit and ask for your reaction that the fact is that if you measure the phillips curve in terms of u3, the connection's been more tenuous but if you do as you just now indicated, in terms of percentage of especially 25 to 64 or 25 to 54-year-olds, participating in the work force, the phillips curve isn't dead and that's in part why we're beginning to see some traction. why would we continue to use u3 when it clearly isn't reflective of what has gone on, especially in the aftermath of the great recession, where people keep coming out of the woodwork to join this work force and as a consequence, that unemployment rate keeps going lower and lower, but we keep adding hundreds of thousands of people to the work force?
is it not -- have we repealed the law of supply and demand, or can we, if we continue to add people to the work force, expect continued wage growth? >> so u3 is just a number to us, it isn't the number. we refer to it quite a bit, but obviously, you know, we look at a broad range of employment indicators. i'm not sure i took your question, though, on this. >> i think my point is that we haven't reached full employment as long as people keep coming out of the woodwork. >> that's where i thought -- yeah. so that's what we're learning. we're learning this. a lot of the margin where we have seen the improvement has been in labor force participation rather than unemployment and that's great. people come in, you could actually see and you have seen, in some months you have seen labor force participation going up, enough labor force participation increase that the unemployment rate actually ticks
up. that's a good thing. >> i'm way over and the chair indulged me to even allow me to ask questions today, for which i'm grateful. two things. we need more wage growth. secondly, i believe you know what you're doing, sir. i thank you for it. >> thank you. >> thank you very much. mr. powell, we have one more member, the gentleman from georgia, then we will wrap it up. >> thank you for your indulgence, madam chair. chairman powell, thank you. i will try to be quick and concise. i do have just a few questions. so i won't make any statements. the first one, real-time payments, you and i have had this discussion before. do you have any idea when you may announce the decision of whether to get into real-time payments or not? >> we're in the middle of -- we haven't actually gotten to, you know, a place where we're getting ready to make a decision, but i think there's
been a ton of work so we're moving forward to try to make a decision when it's ready to do. >> okay. what are the factors you're weighing? >> as you know, this was something that came out of the faster payments task force. that was a group of small banks, large banks, you know, community activists, technologists, card companies, all of that, and there was broad support particularly among the smaller banks. as i mentioned earlier, for us to play a role in final settlement. that was a recommendation that came out of that. so we put out a proposal last year and we asked for comment. we got i think 400 comment letters and we are piling through those, and working our way through assessing the issues. we have to look at two things. one is just the requirements under the monetary control act and there's also just a big policy question which is, is there a role here. there are people who feel strongly that there is a role here for us and there are others
who feel not. so we're having to make a decision on that, and we'll be doing that. >> okay. i appreciate that. keep us in the loop on that. we have several parties, especially in georgia, very interested in the direction you're going. another issue regarding the tailoring of proposals or the tailoring of regulation for domestic and foreign banks. now that the comment period's closed, when do you expect final rules on that to be issued? the tailoring of regulations for domestic and foreign banks. >> for domestic and foreign -- okay. so the comment period for domestic -- i don't have a date for you. i know -- >> i think the comment period is recently closed. from my understanding, the comment period recently closed on that. >> in june for domestic it closed in january. i have to come back to your office. i think vice chair quarles said that we see most things being
wrapped up by the end of the third quarter and darn near everything wrapped up by the end of the year. >> do you anticipate domestic and foreign will be done together? >> i don't know. >> okay. with the remaining time, one other issue. it's important, especially back in georgia. small dollar lending. when the fdic chair mcwilliams testified back in may, i asked her if they plan to address the small dollar lending issue for banks, and she said that she was going to work with the other regulators to get this done. is the fed committed to working with the fdic and occ to come up with a plan for the small dollar lending? >> i think we're doing that, actually. i think there's an interagency group that's carrying that forward right now. >> okay. with that, i think we're all ready to end a very long morning. i appreciate that. madam chair, thank you for your indulgence. i yield back. >> thank you very much.
i'd like to thank chairman powell for his testimony today. without objection, all members will have five legislative days within which to submit additional written questions for the witnesses which will be forwarded to the chairman for his response. i ask you to respond as promptly as you are able. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. this hearing is adjourned. i thank you very much for your patience, mr. powell. neil: fed chairman jerome powell got through that fairly unscathed. welcome back, everybody. i'm neil cavuto. you're watching fox business. the gist of it is this. the man who runs the most important financial institution on the planet signaling that he is going to cut rates. he all but laid it out that the reasons were cross-currents in the economy, clearly referring to trade impasses, and the fact that globally what's going on is rates coming down. he did say as well that the june
jobs report, strong as it was, that was the one that had 224,000 more jobs added to the economy, would not deter him or change the federal reserve outlook. that seemed to signal that at the very least, a quarter point cut in interest rates was coming at the end of this month. one of the reasons why stocks are in and out of about a 100 point gain on the dow right now. all three market averages, including the dow, s&p 500 and nasdaq, have briefly hit records. only the nasdaq hit record territory as we speak. he was also referring to the overall pressure he's been facing from no less than the president of the united states, saying he would not resign if asked by the president to do that. other members, republican and democrat, said the president doesn't have the power to fire him or demote him. he just nodded his head when the subject came up. we should also point out, this is an interesting development, when it came to returning to the gold standard, and one of the people that the president is considering to sit on the federal reserve board is an
advocate of returning to that, he says it's problematic, not a great idea, because it would take us out of the things that we normally follow. in other words, pegging growth in the dollar and all of that to the underlying overall economy, that this would be assigning another responsibility that congress might not want. again, one departure after another from the administration and taking a bow himself for the performance he's done, referring to this recovery going into its 11th year, that the fed's work speaks for itself. the dow up 95 points right now. we will get the read on all of this from edward lawrence on capitol hill. edward, he survived that okay. what do you think? reporter: yeah, three hours and 15 minutes. in fact, he pointed out the economy is solid and remains solid. he says but the 3.1% gdp growth we had in the first quarter, in the second quarter he says we are starting to see businesses slow down their investment growth because of the trade tension and because of the uncertainty around the global slowdown there.
chairman powell said that since the last meeting in june, uncertainty has increased. >> many fomc participants saw that the case for a somewhat more accommodative monetary policy stance had strengthened. since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the u.s. economic outlook. inflation pressures remain muted. reporter: and that may be the indication there that a rate cut is coming at the end of july. now, out of the last fed meeting, two federal reserve presidents publicly said that they should have cut rates because of inflation. the fed chairman says that they are undershooting their target again. the target, 2%. there's growing pressure, the president has been calling for a rate cut. the president even hinting that he could fire jerome powell while you know, the chairwoman of this financial services committee asked the fed chairman about that. listen.
>> if you got a call from the president today or tomorrow and he said i'm firing you, pack up, it's time to go, what would you do? >> well, of course, i would not do that. >> i can't hear you. >> the law clearly gives me a four-year term and i fully intend to serve it. reporter: and the important news out of this, as you said, the federal reserve chairman signaling a rate cut at the end of this year, leaning more that direction than keeping things the way they are. incidentally, neil, they also got a lot of questions about facebook and libra, the new cryptocurrency that facebook wants to put out. the fed chairman saying that he is concerned about that currency on a number of levels, for abuses, for money laundering as well as security related to that. he says the federal reserve has had a meeting with facebook about this and they have a group within the fed that's working on it. back to you. neil: thank you very much, my friend. all right. one of the things we're looking at as well is that pressure that
he was facing and republicans and democrats were addressing it, that if the president of the united states called you and told you were canned, would you step down. he said no. again, wouldn't even entertain being demoted. once he's appointed to a term, unless there's serious malfeasance or he shoots somebody, it's not going to happen. brandywine global portfolio manager jack mcintyre with us and david beckworth. david, he really wanted to assert his independence but i did get a sense he zinged back at the president by saying i've done a pretty good job. we are nae t're in the position because of what i have done, my predecessors have done on the federal reserve, to keep price stability, to keep us in the position where we are now. what did you make of that? >> he did make a good point on that issue but he also made a concession to several people on the committee which i think underlies that claim. he conceded that the safe speed
limit the fed had thought was holding for the economy, the unemployment rate, where they could go no lower, was wrong. he was asked several times did you overestimate how low unemployment could go. he said yeah, we did. so the fact they're not hitting their inflation target, the fact they are second-guessing their december rate hike suggests that he himself has some questions and maybe president trump is touching that nerve. he sees similar symptoms maybe in a different way, but you know, jay powell needs to assert his independence. that's his job as fed chair. neil: very good point. jack, i did get a sense from him that he would kind of recoil, jerome powell, from this notion that the president was right and he was wrong by the pace of rate hikes he engineered, that he went one, maybe two or three too far, and the president was right to point it out. the president has gone so far as to say our recovery would be much more robust, we would be looking eight thiat i think he
10,000 more points on the dow. that's a bit pushing it, i think. but all because the fed overdid it. what did you think of that? >> so i think you don't even have to look at what trump said. look at what the bond market told you. the inverted yield curve. that sent a message to the fed and to powell that hey, they went too far last year, that that last rate hike probably shouldn't have done. i like the fact the bond market's response today is that it's actually steepening. i think that's one of the goals that powell had coming out of his testimony. neil: when you say steepening, in other words, the gap between shorter and longer term rates is widening, not to norms, because it's anything but, but to levels that will not panic investors, right? >> yeah, exactly. you are starting to see hey, maybe the long end of the curve may be starting to price in a little more inflation expectations because clearly, the fed is going to be embarking on a rate cutting move. we just don't know how long it's going to last and the magnitude.
at least we know they're going to cut rates by 25 basis points in july. neil: you know, david, i was surprised that they really didn't lay a glove on him. democrats or republicans. i'm wondering if maybe given the bashing he's been getting from the president and others, that they almost felt we got to rally around this guy. what did you make of that? >> they all gave him a vote of confidence. i think part of it is he's made a considered effort to visit capitol hill. he said earlier he wanted to wear out the carpet in capitol hill. i think he's smart politically as well as thoughtful economically. so he's doing his job to insulate himself i think from political pressure. but it is interesting, they were overly, you know, friendly in some ways, given that some of them also had concerns that the rate hike in december was too much. neil: gentlemen, thank you very, very much. you heard a lot of talk in this testimony today about the phillips curve.
without getting too wonky, just says the lower the unemployment rate goes, the more you have to worry about inflation and the more you have to clamp on the brakes and push interest rates higher to deal with that. well, the message we got from the federal reserve chairman today is that whole phillips curve thing, toss it out the window. it was an issue that no less than alexandria ocasio-cortez got into with the fed chairman. take a look at this. >> given these facts, do you think it's possible that the fed's estimates of the lowest sustainable unemployment rate may have been too high? >> absolutely. >> so we overshot in what our long-run unemployment rate is? >> i think we've learned, as you pointed out, i think we've learned that there's something you can't identify directly, i think we've learned that it's lower than we thought, substantially lower than we thought in the past. neil: what was telling about that line of questioning, she comported herself very, very well, is to say we can live with much lower unemployment than used to be considered full
employment. we are at 3.7%, used to be 5%. and not worry about inflation. i don't want to get too in the weeds here but it was an important distinction and did set the table for that rate cut i alluded to that seems to be all but a given later this month, because there is no inflation. let's go to the "wall street journal" reporter james freeman and our own deirdre bolton. there were no jolts out of this today, right? they are all but telegraphing a rate hike, probably a quarter point? >> i think it's risk on but you asked a really important question when we were talking saturday, should he be doing this, should we be cutting rates. to me that really is the key question. but i think from what we just heard from chairman powell, he will. we can talk about whether that's the right decision or the wrong decision but to me this is risk on. if you look at stocks, treasuries, even gold, every single asset is responding to okay, we got a quarter point at the end of the month.
whether or not we should, debatable. neil: i always debate that, dan. we have gotten into this before. the economy as strong as it is, markets as strong as they are, not that the market should dictate policy, but wouldn't you want to save those arrows in that limited quiver? >> yes, you would. i think this would be a waste of ammunition for the fed to raise rates. obviously they are going to do it. that's where all the indicators are going. i don't think it's the right time. look, i think he made a mistake in raising rates some months back. now he may be trying to make up for that. i still think that the president has gotten in his ear to some extent. everybody's been talking about it. he's not going to admit to it but i think president trump has done enough to -- i don't want to say intimidate him, but he's just in the back of his mind. neil: yeah. we were showing expectations, the market would literally bet money on this, show expectations of a quarter point cut in rates at the end of this month. much more so than a half point cut. what do you make of that
building consensus? >> yeah, the market, people in the staff generally always love rate cuts. now they -- neil: doesn't that worry you? i'm not trying to be a wet blanket, but there's not a real big compelling reason to do it. >> i don't see it. i don't think this is happening or will happen, if it does, because mr. powell's been intimidated by president trump. i think based on how he views inflation, not the way i view it, this is the appropriate move, programs. but that comment you mentioned where he said, when someone asked the question do you know what you're doing, he said look at the economy, he has, i thought, been a more modest fed chair. i wanted the fed to get out of the idea that they're managers of the economy. stick to their job, keeping stable pricing. neil: that was clearly a zing at the president, right? this guy taking a bow for everything that's going on. if we didn't have a supportive or accommodative fed, none of this would happen. people can politically disagree and all. but i thought that was his
little back at you. >> yeah. to your point, i don't see the huge case for a rate cut. if you look at where inflation is versus the federal funds rate, that funds rate is not historically high. i don't hear about businesses saying i would invest if i could get a quarter point less on the financing. i think the issue is he talked about it, it's frayetrade. it's resolving these china disputes, et cetera. that's really not his job. >> although he did say, i wrote it down, something like business investment across the u.s. has slowed notably recently as uncertainties over the economic outlook linger. it wasn't over the economy. it was over to me, what i heard was potentially, to your point about trade, what could happen. neil: what if we get a deal? >> then i think that capital expenditure which we are all concerned about has been soft, it just takes off. i think this economy -- neil: but you won't get a rate cut. >> i don't think the economy needs a rate cut. neil: i'm agreeing with you there. [ speaking simultaneously ]
neil: -- the uncertainty about trade away if you get a deal. >> if you get a trade deal, i don't think there's any problem. there's a competitive tax rate, there's a good regulatory environment. if we have free and open trade, we can finally get out of the era where people are looking to the fed for growth. neil: one thing, you know wall street so well, very successful at investing, normally, normally when rate cuts start, it's not good for stocks. there's a delay three, six months, depending. but when markets get a better sense of it, obviously it's telegraphing a slowdown or the fed is worried about something. net-net not really good. so are they getting ahead of themselves? >> i think they are, neil. i think what's happening now is all the rules and all the historical things that have happened are out the window. to me, we are in an area on wall street and in the market where we are seeing things that simply should not be happening.
all these rules and economic factors just don't seem to be taking hold the way they used to. that's making for a very unpredictable environment for investors, other than right now, things just keep going up no matter what's happening in the world or with the economy. >> i mean, the fed, love them or hate them, have a pretty difficult job. since 1960, i think we have engineered a soft landing twice, right. so if you look at all those decades and think okay, there's general consensus that two times, a fed has actually kind of landed this plane easily, this is against the fed. neil: the chairman of the federal reserve says i'm not going anywhere. stay tuned. he all but told the president of the united states, no, no. more after this.
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neil: back to the business of america, particularly media companies. sprint and t-mobile deal apparently getting close but we've heard that before. charlie gasparino has the latest from the sun valley conference going on as we speak. mr. gasparino. >> mr. cavuto, there's a lot of speculation here about what's going on back there, meaning d.c., whether the doj will finally approve this deal. here's what we know. this is necessary for the t-mobile deal to go forward, you need the doj to say listen,
we're not going to sue to prevent it on antitrust grounds. part of the complicating factor is they want to create or they want the combined entities to sell enough spectrum so somebody, namely dish network, charlie ergen, to create another network. here's the state of play as we hear right now. scuttlebutt here, you've got this confirmed with sources in d.c., there's going to be no announcement today but there has been, what we've heard, some minor progress on making this deal palatable to doj. what do i mean? that both entities, sprint, t-mobile, are going to sell enough spectrum out there presumably to dish or maybe someone else, but dish is the one in the meetings right now, to create that fourth network. you know, there's a give-and-take. they don't want to sell too much. they don't want to make the fourth network that much of a competitor to them but they want to get their deal through, and one way to do that is creating another competitor. that's where we are. again, the sticking point is how much spectrum they are willing to sell.
we keep hearing this thing is day-to-day. it's a likely approval. because you have sort of broad outlines of a deal on the table. i will say this. i know there were some news reports last week about the broad outlines being hammered down more. the talks have been delayed on a lot of reasons, including mr. ergen, who is a very finnicky, tough poker player. he's got to develop that fourth network. he's in the soup of it with the federal communications commission because he's sitting on lots of spectrum. he needs an extension on that because he might have to sell it back in 2020. that's the type of difficult negotiations that are going on here. whenever you get involved with charlie ergen, you know, watch your wallet. you know what i'm saying? this guy is a tough negotiator. so anything is possible. but it looks like it's moving forward. this is day-to-day. could be any day now. it is not today. but i'm hearing progress. we should also point out some of the other sort of issues here.
cbs/viacom, clearly people are talking about that being on the table. they are working towards a merger, those two entities. shari redstone of the national amusements inc., the holding company for both of those, was interviewed today. she didn't say much. but all the action there is actually happening in new york between joe ianniello, the ceo of cbs, and bob bakish, ceo of viacom. anyway, i will tell you if i get thrown oushtt, i will break in h breaking news. it hasn't happened yet. as a matter of fact, the cops love me. just so you know. neil: i'm not at all surprised. because the truth is, it's a green screen behind you. you are no more in idaho than i am. touche to you. who else is there? who are the big media guns there? >> yeah. barry dillard just drove by, rode by on a bike. he's here. dianne von furstenburg is here.
any other names? who? sheryl sandberg is here. lydia moynihan is here. of course, she gets paid almost nothing to work. great discussion on the fed. i will put in one thing. the reason why full employment should be lower than 5%, because we have higher now underemployment. think about that. lot of people have dropped out of the work force, still haven't gotten back in. still, if you look at history it's pretty high. why should it be 5%, not 3%, if there are people dropping out of the work force. something to keep in mind. that's one reason i think the fed is readjusting its models according to the people i talk to. back to you. neil: thank you. great reporting from out there. stay healthy. don't break anyone's nose or anything like that. charlie gasparino. the dow right now is up
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would you mind passing my book there. once again, that's... and financing is available for qualified purchasers. we've agreed to begin discussions again with china, and while that's a constructive step, it doesn't remove the uncertainty that we see as overall weighing on the outlook. neil: the uncertainty weighing on the outlook. that was really what the markets pounced on, that even with the strong employment report that the federal reserve chairman was pointing to, it doesn't offset all these uncertainties out there with trade and a host of others, the global phenomenon, the interest rates collapsing,
they are actually in negative territory in germany. you can't ignore that. so expect a cut in interest rates by the end of the month. 80% at least who put money on the line think it will be a quarter point at the end of the month. now fewer than one out of i guess about ten are looking at the possibility of a half point cut. that seems to be getting less and less now. let's go to north dakota republican senator on all of this. senator, always good to have you. what he seems to be saying, if i'm reading him correctly, senator, is the overall economy is sound but i might have to take out an insurance policy to make sure it stays that way by cutting rates a teeny bit. what do you make of that? >> yeah, that's exactly what i understand, too, from what he said. that is that he's going to be watching the economy and what we're seeing is softness in the international or global economy, and so it's very possible that they will cut the discount rate. neil: all right. the federal funds rate first,
but is it your sense that that alone is going to do it? in other words, the president has already made it clear, as you know, you are doing everything to goose the system they can, devalue the currency, the chinese, the same and if we don't hop on board and do the same by lowering interest rates a lot, we're going to be behind the eight ball. do you share that concern? >> well, i do share the concern that you want to keep interest rates low with some of the things we're seeing in our economy. you know, we talk about trade, we talk about the ag economy right now, we talk about the global economy, and all of those are important factors, so i think he's talking about them and looking at them and i think it's the right thing to do. neil: you know, senator, the trade issue is the one thing that's not quite locked down. i'm wondering if we were miraculously to get progress on that or maybe even a deal, i know both sides have talked on the phone about the parameters of future talks, but it's not immediate, but let's say we do have a deal, do you need a rate
cut? >> well, we'll see. again, the fed's monitoring this. i mean, you know, they always talk about that. they're going to react to, you know, the economic events as they occur. but clearly, there are things that are having a negative or an impact on the economy that would tend to look like maybe it's softening a little and they have to be prepared for that. i think that's why he's talking about the possibility of a cut in the rate. but we'll see. they will adjust accordingly. neil: when you look at what's happening in the economy right now, going into the 11th year of a recovery, the longest on record, the fed chairman seemed to wince at the notion that it's all the politicians, it's the president or the prior president. he seemed to be saying you know, my report card is this economy, and give me some credit for that. i'm oversimplifying it but what he was saying, if i'm doing such a lousy job, then why are we
doing so well. what did you make of that? >> i think that's why it's important that he signaled today that the fed may cut interest rates if needed. that i think was the right response in terms of keeping, you know, the economy moving on a stable footing. we need to do everything we can, whether it's trade negotiations, move the usmca, get that ratified in congress, move it across the house floor so we can take it up and pass it in the senate, get a trade deal with japan, keep the negotiations going with china, try to get a deal there, so all these things are important but absolutely, the fed has to be responsive and i think that's what powell was signaling today. neil: senator, real quick, he was asked the question as he has been several times if the president called you up to say i want you out of there, go pack up, leave, that he wouldn't, that he has a four-year mandate, end of story. do you agree with that? >> well, that is how the position works. certainly i hope it doesn't come to that.
again, as long as the fed is responsive and keeps the economy on an even keel, that's what we want. neil: all right. senator, thank you very much for taking the time. senator hoeven of the beautiful state of north dakota. by the way, what are the rules on this? sure enough, chairman of the federal reserve, you know, piling up criminal actives, shooting someone outside the steps of that august building in washington, or malfeasance to the extreme, you can't fire the chairman of the federal reserve. you can appoint them, you can decide not to reappoint them if you don't like them for a variety of reasons, but once in there, four years, just to do what he or she, in the case of his predecessor, wants to do. end of story. in the meantime, a delta flight making an emergency landing after some passengers say the engine literally falling apart in midflight. can you imagine this? everyone's okay but holy cow. this is the couple who wanted to get away
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go to stamps.com/try and never go to the post office again! a number of people get higher wages and there are people lose their jobs, and those numbers will change depending on what assumptions you make, and it really is something that there's no consensus among economists. economists are all over the place on this. so it's really a question for you. neil: all right. what jerome powell was talking about is this latest push to get the federal government to raise the federal minimum wage to $15 an hour. you know, there's a cbo study, congressional budget office study out that says you do that, it will benefit 17 million americans, but more than 1.3 million will probably lose their jobs in the process. but lee speakerman says we are
already paying the cost for these wages as we speak. good to have you back. i didn't quite understand, are you, then, in agreement that the federal government should just make this official right now, to end the debate, or is it, you know, exacerbating the problem? >> well, i do think the federal government should take the lead on it but i think it's important that we look at the minimum wage in the right framework. people say that mandating an increase in the minimum wage is some kind of leftist or socialist idea. quite the contrary. i'll tell you what's leftism and socialism, is making people more dependent on federal social and state social welfare programs. and right now, with people underemployed and charlie gasparino mentioned it in the last segment, when you have people that are making a wage but it is not sufficient to lift them out of poverty, they then become reliant either themselves or through their family members, on social welfare programs.
guess who pays for those social welfare programs? other companies that pay a higher wage and us as taxpayers. how is that fair or how is that conservative? we have got to encourage work and encourage people to get off of social welfare. in 1968 and today's dollars, the minimum wage was $12 an hour. well, what a coincidence. $12 an hour is just about what it takes to be at the very bottom of the middle class in the united states. it's about $26,000 a year to be in the bottom of the middle class, and that's a little more than $12 an hour. that would be a logical starting point. now, i will say if we raise the minimum wage, which i think we should, we've got to do it a smart way. number one, it should be based on metropolitan areas. obviously it costs dramatically more to live in the bay area of california or new york city than it does in jackson, mississippi or dayton, ohio. so the minimum wage should be
based and weighted based on local metropolitan cost of living in the metropolitan statistical areas. number two, we have got to have a differential, a lower minimum wage, for teenagers who do not have children as dependents because we've got to get, especially disadvantaged minorities in this country on that first rung of the ladder for their career. and that means we need to encourage employers to get them on the payroll, to train them, to get them in the work force. that's crucial. so let's have a minimum wage increase, let's base it on the number that worked back in 1968, $12, which just gets you barely into the middle class in this country, and let's have a lower teen wage, if you don't have -- if the teenager doesn't have any children as dependents, and let's base it on local metropolitan areas, not one number for the entire country. neil: well, that would behoove you not going with a standard, you know, federal rate, right? >> well, you have a federal rate
but let's say we use $12 today, the number would be $12 as a benchmark but maybe it would be a little more than $12 in san francisco and new york, and lower in jackson, mississippi. neil: no, you make sense. you know what's remarkable, you think about this, there was a lot of hand wringing when there was this push to get higher minimum wage in that it would hurt businesses and of course, so many states have raised their minimum wage, some at $15, some near that, the economy of course still booming and a lot of these jobs go begging. so the market is deciding rates and even a lot of kids in these communities are opting, you know, give me more, give me more. so could the market decide this? >> well, the market can decide it but you know something, the market is never left entirely to its own devices. if you have a corporation or limited liability company, you get a lot of special dispensation from the federal government, at least in the
short term. you get limited liability so that the people that run the company or own it don't, you know, aren't responsible for the debts if it goes bankrupt. you get a lower tax rate. those are dispensations by the government. why can't workers get those? neil: fair point. >> we need to start encouraging work and encouraging higher middle class incomes in this country, which has been in a downward vortex because of horrible trade deals and other bad government policies. we have a lot of underemployed people in this country. i think doing a smart minimum wage increase with a lower teen differential and basing it on metropolitan areas is the way to do it. that is conservative. it is not leftist or socialist. neil: well spoken. riddle wrapped in a conundrum. appreciate it, my friend. the dow close to a record. more after this. (vo) the hamsters, run hopelessly in their cage. content on their endless quest, to nowhere. but perhaps this year, a more exhilarating endeavor awaits.
secretary of united states, alex acosta. will hole a news conference. no word whether he will step down how he handled the jeffrey epstein case a year ago. he will be asked a lot of questions about it. we'll see what happens there. waiting for fed minutes. charles payne will do the honors. we're up 119 on the dow. just shy of record territory reached on july third, the day before the 4th of july holiday. anything can happen, probably will, in the next two hours. now to my colleague and friend, best-selling author at that, charles payne. hey, buddy. charles: neil, thank you very much. i'm charles payne. this is "making money." major equitying to neil's point hit all-time highs after fed chairman jay powell. powell finishing up testimony on capitol hill.
we'll have the details what he said and what he meant with the things that he said. but first, i want head over to jennifer schoenberger at the federal reserve with the release of the fed minutes this is important as well. jennifer. reporter: charles, fed members circling around the notion of a rate cut. it is really a question of when, not if, internal discussions among fed officials at their policy meeting three weeks ago many think that the case for somewhat more accommodative policy has strengthened. several members thought additional accommodative policy would be warranted if trade tensions and slowing global growth continue to weigh on the outlook. federal officials think a rate cut could help blunt a shock to the economy, act as good risk management. there were some members thought that a rate cut was not yet warranted, that more data needed to be collected. when the fed met three weeks ago, they felt uncertainty to downside ris