tv Cavuto Coast to Coast FOX Business July 31, 2019 12:00pm-2:00pm EDT
dow industrials up 23 points. 27,200. don't forget later today, 2:00, eastern, "making money with charles payne." special coverage of the federal reserve. we'll all be there, including neil, who is about, neil, maria, me, lou. now, neil, it is yours. neil: there's a party. thank you, my friend. we have a lot coming up including the first round of rate cuts we could see in better part of a decade. that might just make the presidents' day we'll explain. there is an interesting correlation between rate cuts and how the next election goes. the next round of china trade talks are set. even though they're scheduled for september in the usa, there is little sign of progress on either side of the globe. a second round of debates set with joe biden promising to take the gloves off. he will be a target for other players there as well. meantime, let's take a good look where we stand. this is more than normal right now, given the approaching fed
announcements, still a couple hours away. edward lawrence where things stand. reporter: the federal reserve has not cut-rate since december of 2018. nowed administration would like to see -- 2008. the market is pricing in a 25 basis point rate cut at this point. if you look at the speeches over the past month or so, of the 10 voting members on the federal open market committee six of those, those six on the screen, have indicated they would favor a rate cut. now this federal reserve chairman jerome powell says that the federal reserve will use its tools to keep the expansion going. this is important, his language is important, not to head off a downturn but keep the expansion going. that could signal the federal reserve could act before they saw any numbers that represent a downturn. they are slow and deliberate in the moves up. a senior administration official says the president will call for a more aggressive monetary policy. the official says the president
want a 50 basis point cut today. senior administration official, this person says, quote you can bet on it, that fell ral reserve jerome powell will bear the president's wrath today. they have raised rates seven times, each time has been 25 basis point raise. there have been nine rate hikes since december of 2015. the fed is moving solely up the past two years or so. this they expect will be a slow and deliberate move down if the fed reserves or deems it necessary to have a rate cut today. back to you. neil: neil: edward, to be clear talking about the president, he has been jawboning the federal reserve. he presumably would be disappointed with a quarter-point cut unless powell shows more.
reporter: the president want to see a 50 basis point cut today. if that does not happen a senior administration official saying jerome powell will feel the wrath of the president on probably on twitter in series of tweets. neil: how much more wrath can he feel? every day he is targeted. edward lawrence, thank you very much. there is a prevailing view helps the party in party. given 80% likelihood we'll see a cut in rates. i don't have to go back far, when we saw rate cuts in effect in 1984, it did pave the way for ronald reagan's re-election. not that all was in question by the time we got later in the year and there were other developments t certainly helped in 1987, a good timing for a stock market crash. commensurate cut in rates under alan greenspan to pave the way for george bush, sr., then being elected to the presidency
himself. the delay, six month to a year, economy improves, the market improves, ultimately the prospects for the party in the white house improves. "making money" host charles payne with us right now. he will be leading our coverage in about two hours. charles has been very busy on this. let me get your take on that, that politically, leaving aside whether it is it doesn't hurt if you're the party in power? >> absolutely not. conversely george bush, sr., he says he lost the election because of a rate hike. at one point poll numbers were astronomical. he looked like they were a shoo-in, when he did not win, he blamed it on federal reserve. federal reserve is under a big amount of pressure when it comes close to elections. neil: there is possibility after half-point cut. i don't know if we'll see that.
but we wait for the jerome powell statement, whether he could hint there will be more to come, right? >> that is what wall street is looking for. i think there have been three major powell mistakes. october 3rd said we were a long way from neutral. the market went into a tailspin. every day got worse and worse. of course december 19th, that rate hike, between that day and christmas eve, it was even worse. and then i think may 1st, when he said, low inflation was transit. the big question will be do you still think low inflation is transitory. if the answer is yes, the market goes down big time. if the answer is maybe we were wrong, maybe it is more embedded than we thought, maybe we have to take more action to curb that, i think the market will go much higher. neil: wouldn't his actions today address that? if you cut a quarter point, you already acknowledged, whoops, we overdid it? >> he is acknowledging today
that he overdid it. there is no doubt about that. he is building up to this in his language. everyone has egos, including the federal reserve. they can't come out to say it was mistake. certainly the last rate hike. the point was made by the new york fed president john williams when he came out and said, hey, if you do this right if we're really worried about low inflation, the idea we should be saving our arrows, as few as they are, is mistake. neil: be preemptive so you don't have to use them. >> you have two arrows left, use them. don't try to save them because the foe -- here is the thing. i pulled up this report from november of 2003, neil, from fed governor ben bernanke. he talks about deflation, it is so amazing this piece. everyone should really know about this. the main thing he said the central bank should act preeminently and more aggressively. he said the bottom line is
sustained inflation can be highly disruptive to a modern economy and should be strongly resisted. there is anxiety in the fed about low inflation becoming deflation. neil: going to bring in art laffer into this. there is $3.8 trillion, what i call a slush fund the fed has had. it has been sort of paring down. it might stop paring that down. that would be double stimulus, right? >> absolutely would be. stop rolling off the treasurys and start to get back into the market, yields would probably start going even lower. but, they have taken a lot of verying a agressive action. it has been a long time. 25 basis points would be calming, but it is what jay powell says today, i think what wall street wants for reassurance. neil: you know, i mentioned art laffer, the former ronald reagan economic advisor who joins us now. you know, art, i can understand some of the strategies to
charles' point, sort of make a preemptive move here. not a matter of number of arrows in your quiver but use them judiciously i get that but it is still a very, very strong economy, very, very strong markets, i know getting a head of a steam that the market wants to see interest rates are going to be cut but i don't see the need for it and i would rather who am i to save it for something that warrants it. obviously charles disagrees. i'm sure even you do. with do you make make of that the precedent we could be setting here? >> i think the fed followed rates in the marketplace and what you find is the federal funds discount rate is too high, given market rates today and they have broken tradition by not following rates down, they should have lowered them as charles said the two times before they shouldn't have hiked them. with rates falling, anyone other than following the rate, neil is a break in precedent and really
what you call the arrows in the quiver. neil: don't you worry that you're doing the market's bidding? i understand that. i would be naive to assume, fed district presidents, governors, chairmen and women don't ignore the markets but this is palpably obvious they're following the markets. is that a good idea. >> oh it is a great idea. it should be just a little bit below. so what you find, member banks don't borrow from the fed because of an interest rate differential. they borrow from the fed because they need excess reserves for whatever reason it might be that is why they follow the rate, keep it above or below, not way out of the rate, so it is advantageous to borrow from the fed. obviously with rates this high no one wants to borrow from the fed if the market rates are much lower. keep it the way fed should be neutral almost all the time until they really need to do something. they don't need to do something
except bring rates back in line with market rates, and everything will be hunky-dory. charles is completely correct on the mistakes they made. they can make a big mistake saying inflation is transitory. that would be a very large mistake. it is not transitory. neil: i will get back to charles on this, i know we do things in cycles. when we cut rates in 1995, charles, we cut them three times. in 1998 we cut them three times. 2006 and 7, three times each. after 2008, a dozen times until we got to zero. i understand that. you could make the argument in most of those periods we were not in recession, we were concerned about what was going on in the globe. now i guess the concern is, rates are much lower, many everywhere else in germany and france, they are negative. so i understand that. are we widening the rational for a cut in rates when we don't
have -- we don't have anything approaching one and we're mimicking what is going on around the globe, is that a good idea? >> it is in a sense we live in a more global economy these days. that was evident when president trump started talking about the trade war. it is interesting a lot of the orthodox thinkers out there, economically orthodox thinkers out there railed against you know how interconnected we are with the world, why we shouldn't have a trade war but they also think the fed shouldn't be looking just how interconnected we are as well. neil: that is a good point. >> also i got to tell you the last five rate hiking, rate-cutting cycles, last two began with 50 basis points. we had one that began with 100 basis points. we had one that began with 125. neil: much higher rates. >> the point i'm making, it was an emergency. i think jay powell, if you listen to him he is so proud of this recovery. he gives the fed credit for this recovery.
i he is determined that he will not allow recession on his watch. i think now he is willing to go, to sort of be concerned about, even after 2% he says, symmetrical. we may go a little over it. neil: right. >> i think he is so concerned about erring on the side of actually triggering recessions which by the way the federal reserve has been known to do. neil: you know, art, one thing i do wonder about where we go if we're trying to entice inflation? that's a 180 from what the federal reserve has normally done in the past and it might be perfectly sound, perfectly valid in this environment, perfectly warranted but that's weird. >> you don't want to entice inflation. there is no reason for having inflation in this world. perfectly stable prices are just wonderful. what you don't want to have, neil, i don't think you want the u.s. out of sync with world market. interest rates in other countries are negative right now. inflation is not here. interest rates this high are
going to do damage rather than just being neutral with respect to the market. neil: it hasn't hurt money coming to this country, right? >> of course not. well, no it hasn't hurt more money coming into this country but what you've got is a global marketplace here where other rates are much lower than ours. in addition to that our inflationary expectations are much lower. the long bond has dropped dramatic criminal. it bring the federal funds discount rate back in sync with markets. that is all what should be happening here. no deliberate policy reason, way too high unemployment or worried about recession, none of that is true. when they go out of zing they can change because che effect recession or expected boom. keeping in sync is all they should do. that is why 50 basis points would do it. neil: i'm a old fogy here, i remember inflation, i remember when you see the whites of its
eyes it is too late. all of sudden it explodes. because we've gone so many years without it there is sort of a cockiness we get. >> on sunday barron's had article about software stocks being in a bubble area. on monday jpmorgan talked about certain assets being in a bubble area and another firm yesterday. the bubble word is bubbling up again to your point, but, and jay powell said this, it is much harder for the fed to arrest deflation than it is inflation. if you talk about the great recession, great depression, that was deflationary death spiral. there is nothing they can do once it gets going. i think he is worried about it. neil: the other thing to worry about, if you go the other way. >> absolutely. neil: i will argue with you later. by the way charles will lead the coverage. >> i will referee. neil: i know who you're rooting for. joining charles, maria bartiromo, stuart varney, lou dobbs, myself. we'll be looking forward to it.
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>> giant corporations and billionaires are going to pay more, middle-class families will pay less out-of-pocket for health care. >> "medicare for all" is comprehensive. it covers all health care need for senior citizens. it will finally include dental care, hearing aids an eyeglasses. >> but don't know that, bernie. >> i do know it, i wrote the damn bill. >> i am only one on the stage with experience in the health care business, with all due respect i don't think my colleagues understand the
business. >> it is not a business. neil: we didn't he had it that. that is how it went. they are hoping by pushing that right now, and some lucid plans they argue will improve on health care in this country that it will do the same this go-round. could they have torpedoed themselves in so doing? charlie gasparino is here and former tennessee congressman harold ford, jr. good to have you. >> you don't say it is good to have me. neil: you're like mold but in a good way. i was thinking saying during the break, would you be as this moderate democrat, you want to call yourself, would you be out of sync with a party going at it last night? >> with the party being reasonable and party is affordable with ideas achievable. in this case, take biden out, majority candidates sit further
to the left than some like me. i was plead with the way bullock, tim ryan, even amy klobuchar to a extent, countered and pushed back, i believe in progressive politics but you have to look at things that affordable, things that are reasonable. that is amazing exchange you showed, steve bullock, here we are democrats debating whether or not we should repeal obamacare. are we giving this message to the republicans a year later? neil: elizabeth warren responding to delaney, what we can't do, rather what we can't. that is not democrats. >> she has every right to hold that opinion. for the fatly we live in democracy. just because you want to spend the nation's money you can try to make that case but others want to achieve the same end. universal health care affordable accessible, urge people to live healthier lives. bill clinton would not have a won. barack obama would not have won.
they quoted barack obama more last night than others to make the case. i was surprised senator sanders did not get asked question about $15 minimum wage. in his own campaign he cannot afford it. as much as he wants to do it, there are business realities that collide. that is the point delaney made eloquently. neil: you are arguing the candidates are out of sync with democratic voters. >> most of the candidates. not most maybe half and half. that is what was good for the debate. you got a flavor of the debate in the democratic party. leaders of the democratic party, many of them, sanders, warren, are pushing progressive socialist, sort of solutions while, you know, others like delaney, biden, tim ryan, are calling for much more incrementalist approach that most people appeal to. i think it is going to be interesting tonight. it will be a little different. tonight it will be biden.
we'll have kamala harris back again. we'll have cory booker. tonight i think, last night it was more sort of public policy debates about health care. current policy. tonight might turn to race. i'm telling you -- neil: i'm surprised it didn't last night. >> i think the it will change. they feel, cory, obviously kamala harris, feel that biden is vulnerable on this based on his position on busing. here is the thing i keep hearing. biden will fight back. he will being a agressive. i will tell you this, if i'm joe biden, an i'm asked about busing and harold is little younger than me, he remembers this, you bring up south boston. neil: substantially. >> seven years. you bring up south boston. that was the focal point, riots in south boston over busing. think about this, black kids were bussed into south boston high school, one of the worst schools in boston. they were not bused to a great
suburban school. they were bused one of the worst schools to achieve a liberal experiment that did not work. neil: you know what i think about that, whatever passions you feel about the left or right, most people don't even know it, remember it, recognize it. >> right. neil: do you see, given strength of the economy, what is going on whether you want to attribute at that to president trump or his predecessor, barack obama, that is not a winning issue for democrats, so they pound these other issues? maybe they are getting it on health care. certainly helped them take over the house. would that be a wise strategy to push that? >> instead of free, free, it ought to be work, earn and own. we have to figure out policies help more americans do that. there is no doubt you will not make the case successfully the economy is in terrible shape, that the markets are in terrible shape. what you can do, make the case, charlie and i had a great conversation out on west coast about this, it is not opportunity an chance is not
evenly distributed as they should be. i hope democrat don't fall from the pump fake from the president on race. the more they do that, last night i was pleased they did not. i fear tonight could find itself more in that space. i hope my old friends decide not to go there. the president was so confident and sure about the economy, that is his argument, i don't think he would be raising this issue and trying to tempt, taunt democrats to go down. >> you know what is interesting talking about the economy? the democrats took control of the house in good economy, right? >> right. >> where do they take control. they took control not with bernie sanders candidates and bernie sanders districts. they took it over in tim ryan districts. >> correct. >> klobuchar districts. neil: 32 of the 40 were moderate. >> that moderate democrat approach, as much as conservative i am, does work with voters. if they do that can work. >> i don't think one of the 40 democrats won the house flipped supporting impeachment. you look at dynamics there. neil: very good point. >> if you run for president, you
neil: over trade, undertrade, apple in and out of that monolithic level on better than expected revenues and earnings report, out of the, i guess we call it electronic retail giant. it is much more than just a gadget maker. the latest period seems seems to show that unequivocally. susan li is keeping an eye on this one. sees r susan. >> apple is no longer a hardware company. for the first time since 2012, this report card cemented the fact that iphone sales, now make up less than half of revenue for apple going back to
2012. it also points out to the trend we know in the smartphone market. which is that people are not buying as many smartphones as they used to. saturation. those that want a smartphone probably have one. there is not that much new to motivate customers to spend four figures on new phone, what we call longer upgrade cycle. for apple, it was a strong quarter. things are not getting worse. beat on top and bottom line. guidance going forward for the september quarter which is crucial for them. september is usually when they launch the new devices. forecasting better than expected sales. that means that new devices should ignite more interest in apple products going forward. that will be important since services hit a record. meaning people spent more, the most in fact on apple music, apple care, the cloud. they want services to make up a big chunk of their earnings going forward especially with slowing iphone sales. they told us also they are going
to launch a new financial services in august. that is next month. so we're talking about a new apple card and credit, getting bigger in the financial space. on top of apple pay. as for the macbook pro as well. they say they continue to make that in the u.s. they want to continue making that in the u.s. but will it? that is still in question. i spoke to the cfo in earnings who told me the main factor in the report card, this is the main factor of apple since china is the second largest market, their biggest growth market. they say things are getting better in china. why you saw that reflected also in services as well. but i want to talk about samsung because as i mentioned to you it is not just apple seeing slower iphone sales and phone sales. samsung reported a decrease in basically their operating profit halved during the quarter because of falling memory chip prices. i guess for phone sales, samsung is the largest shipper, neil,
they say weakness continues for the second half of this year. in fact mobile revenue was down 42%. neil: susan, covered a lot of ground there, thank you very much. susan li on apple, exposure to china, china trade talks will resume next month, now the question what do we do? how far do we push? how do the chinese push? after this. let me ask you something. can the past help you write the future? can you feel calm in the eye of a storm? can you do more with less? can you raise the bar while reducing your footprint?
neil: all right, we agree to talk again. u.s. officials leaving china without a new deal. new talks set for september in usa. blake burman, this is slow-going but keep going plan, right, blake? port tort that is a food way to put it. remember there was a frenetic pace before the talks broke down in early may. one week after the next where the trade team would go to china. then the chinese team would come to d.c. suddenly everything broke apart in may. now the talks are back on. one of the main headlines out of this is the next set of discussions will be in september. you can look at the calendar. you can see that is a full month away. things have absolutely slowed down. you can pair that with the comments president trump made in the lead-up to all of this, he thinks china might be trying to wait him out until november 2020. so the place absolutely slowed down. that is one headline out of this. the next talks coming in
september. the other, that china committed to a large-scale a gbuy. this is something president talked about leading up to the meetings. both sides say china will go forward. we don't have many details related to size, scope, when, what, et cetera on down the line. by the way, neil, when you look at statements put out both u.s. and china, the one word that appears is constructive that is the way they're trying to frame this. also a word that does not appear in there is huawei, which as we know was an issue a top issue for the chinese side. yes, go slow, move forward, but what you pair a month gap with what the president is saying now, you have to wonder where this leads a month, six months, 12 month, 15 months, whatever it is down the line. neil: nothing immediate to your point. blake burman, thank you very, very much. blake just mentioned huawei. keep in mind huawei is doing just fine through all of this. revenues unexpectedly strong
despite being targeted by the administration for all sorts of things. so huawei is surviving. hints that china's economy might be bottoming out. in other words the worst is over. at least the view of things in beijing. let's get the read of brian wesbury who follows this very closely. the counter argument that china needs more than we do is some of the things going on in china. that huawei is more than absorbing these body blows. that the chinese economy might be as well, over the worst of it. that is why they're taking their sweet time. what do you think? >> well, there is part of me that does believe china is trying to wait out president trump, but, one of the things that we can't forget is that every day a supply chain is leaving china and going to vietnam, to taiwan, mexico, coming back to the united states. there are dozens and dozens of companies already moved.
you see it. exports coming from vietnam. exports coming from mexico, they're growing, while exports coming from china to the united states have slowed down. so it's a dangerous game for china to play. i mean people tell me they think in 100 year terms. that is not what companies do. and so if they're faced with a 25% tariff, they're going to start moving that supply chain to keep costs to their customers down. neil: all right, but the president is sort of suspected what is going on here is more overtly political. in other words, we don't want to deal with this president because he is too unreasonable, too demanding. so we'll deal with, as president says one of these other stiffs running for president. i think he meant "sleepy" joe biden or whatever. what could be in the argument, could there be a grain of truth? maybe the chinese want to roll the dice, see how the election goes? why make a commitment with this guy when we might find a more
accommodative president? >> there is no doubt. when you look back, president bush, president obama, both left china alone while they were stealing, we knew they were stealing our technology. and you know, i don't know what our choices are as americans. how do we stop china from stealing technology? how many tools do we have? we'll not go to war over it. so really the one tool we have is tariffs. don't get me wrong, neil, i'm a free trader, i'm a reagan guy. i don't like tariffs but china has held its tariffs above the u.s.'s for a long time. they have stolen technology. and it is time for them, the way i put it is, kind of time for them to grow up and become part of the global trading system where tariffs are equal. i think that is what the president is trying to do. and china may not want to do that but i think eventually they have to.
so, yes, it is better to deal with somebody who will leave you alone but somebody coming after you, it is, and you don't want to do that, but it's working because the supply chains are leaving china and, i don't believe they will go back, even if tariffs come back down. neil: brian, what makes you a brilliant economist you're not afraid to speak english and say to the chinese it is time to grow up. >> yep. neil: i like that. thank you very much, my friend brian wesbury out of all that. we just got into our newsroom, some video, goes back aways, a young charlie gasparino bemoaning monopoly in certain feature. take a look. >> it is the worst part of the game. >> what is? >> taxes. you wouldn't accept an incomplete job
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>> if we say our wall we will walk people up who come here seeking refuge, that is not a crime. >> i expect that people who come here follow our laws. we reserve the right to criminally prosecute them. >> thank you, congressman. >> if fraud is involved that is suitable for the criminal statute. if not, it should be handled under civil law. >> if you want to come into the country, you should at least ring the doorbell. neil: democrats are split on decriminalizing border crossings. this was first to see there was disagreement with candidates and more progressives, you want to describe it. washington examiner kelly jane torrence senior editor. this is one of the first debates where this divide this divide became glarerying obvious, certainly among the electorate but you wouldn't know it among the democratic candidates. this time you did. what do you think? >> you're right, neil. that is so interesting we have a
mix of who is on the debate stage when. you have 20 people on the stage, 10 each night. the first debate, eight out of the 10 said they supported decriminalizing illegal border crossings. this time it was more mixed because you had different people on that stage. you're right, it was a stark divide. and it wasn't just, you know, some people think this, some people think that. there were tough words spoken. you know, that and health care were the two issues i think last night, that really showed how these candidates are different. certainly will be helpful for democratic voters. but of course, i think it is also going to be very helpful to the general public who will vote for one of the people that was on the stage right last night or tonight. neil: what about elizabeth warren? she got high marks getting back to the soul of the party, bemoaning what congressman delaney, don't keep telling us about the things we can't do. focus on the things we try to do. i'm oversimplifying it. but that was popular with many in the progressive crowd but she
was also reminding a lot of people, you have got some very expensive plans here. >> exactly. i think, at that moment i think you said it all, people like john dell mainry, like congressman tim ryan, are more pragmatists, more sensible, i might even say democrats. they're polling very poorly. of course it is people like bernie sanders and elizabeth warren who are doing so well. because the democratic base is idealistic to the point of utopianism. the people with all these great plans. no way to explain how we'll afford them. bernie sanders at one point last night said that we'll be able to pay for undocumented immigrants health care with "medicare for all." he literally said almost exactly what, we'll have "medicare for all," so we'll be able to pay for it? how will we pay for "medicare for all"? i'm not sure bernie have given that serious consideration.
that is something john delaney and tim ryan pushed him on. your path was wrong is one of the funniest lines. i'm not sure bernie tried to do the math. neil: but i wrote the damn bill. is one of my favorite lines. we're obviously focusing on federal reserve. this is wrapping up hour and 15 minutes ago, we're betting, that is always dangerous, betting first time more than a decade interest rates are coming down. last go round we were doing that, we were in middle of a severe re session. some say on the verge of a depression. that is then. different environment now. what will happen after this day? after this.
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>> oh, my gosh. >> where is all your money going? >> taxes. nine, 10, 11. let me fix my houses. >> but it's okay, it is part of the game. >> no it is not. it is not fun -- >> it is not fun to -- >> it is the worst part of the game. >> is what? >> taxes. neil: what do you think of that? when i was that little boy's age, i mean, ponderosa running out of prime rib would have elicited that response the tax thing. might be a different response. that is just me. if democrat get their way, there is a fear this is going to be repeated. take a look. >> what we need is a political revolution that tells these billionaires and corporate america, that they are americans, they participate in our society, but they have got
to start paying their fair share of taxes, period. >> raise capital-gains tax. roll back taxes on wealthy americans. >> americans to pay for it. >> giant corporations and billionaires are going to pay more. neil: national taxpayers union executive vice president brandon arnold. brandon, good to have you. what do you make of the back and forth how you pay for a lot of this stuff, largely hiking taxes? >> the democrats like to talk about new projects they want to spend money on, "medicare for all," whether that is "green new deal," very few of them, i will give bernie credit here, very few of them will talk about the taxes necessary to finance the huge programs. bernie offered up $14 trillion in new tax increases on working place people, upper income earners, pretty much everybody. very few other democrats are willing to step up, other than saying they want to repeal the tax cuts, jobs act. what types of tax increases they will offer up in order to finance these extraordinarily
expensive new programs. neil: having said all of that, though, you give bernie sanders credit. at least he take as stab trying to pay for it, tells you, even extending tax hikes to the middle class, they will get fa more back than paying in, leaving that aside, i wonder how appealing that will be? in a general election whoever is the nominee will have to explain a position where taking away tax cuts is essentially raising taxes. you have to make it very clear, not on you, middle america, not on you, average americans, but on others. will that fly? >> i don't think so. elizabeth warren was obviously a little bit nervous about that last night. she shied away from questions how "medicare for all" would impact middle class taxpayers. she wouldn't answer it. she will drive down health care costs. i don't think that is true. "medicare for all" will increase costs $2 trillion. she likes to claim they will
fall on corporations, billionaires. there is not enough money there the math doesn't work. if you finance the programs, make them deficit neutral, you well absolutely raise taxes on middle income people, on pretty much all americans, all taxpayers. neil: republicans are in this weird position, you're wasting a lot of money here when in fact they have presided over these, you know, continued pile on of deficits and debt. so i'm wondering how they kind of right themselves in an election that is going to be as well about how, spending or taxes, whatever you want to cite is making the situation worse, and neither party seems to show much resolve in this matter? >> i completely agree. on this very day the senate is about to vote to increase spending by about $320 billion. this is a republican-controlled senate that will send a bill to a republican president who will sign that into law. $320 billion. who will pay the taxes ultimately that will be necessary to eventually pay off this debt? kids like the one in that video
you showed, younger generation, my kids, our grandchildren. those people will have to pay for that. the republicans desperately need to reclaim the man tell of fiscal responsibility. how do they get there? i don't know but we'll have two parties fighting with one another to how to spend more money and raise deficits that are out of control. neil: what disturbs me, brandon, voters, polled on issues most concerning, the debt and piling deficits not in the top 10. that is a little alarming. >> that is absolutely true. mitch mcconnell said recently, people usually don't get in trouble, politicians don't get in trouble for spending too much money. they get in trouble spending not enough. if that is the case we need to turn the conversation on its head. right now we can't afford trillion dollar deficits each and every year with politicians want nothing more than to spend
increasing amount of money, to not finance that in any responsible manner. it's a little bit troubling. hopefully advocates like you, neil, can spread the message voters need to be more cognizant what we're doing with future generations with this spending. neil: brandon, thank you very much. good seeing. >> you thank you. neil: a long time for david stockman, the man ronald reagan took to the woodshed, is now screaming at the top of his lungs that both parties are failing you. after this. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. ♪ corey is living with metastatic breast cancer, which is breast cancer that has spread
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neil: one hour. i'm so nervous. one hour, we'll know whether the federal reserve will cut interest rates for the first time in the better part of a decade. what is also getting a lot of attention is what jerome powell has to say, remarks after that announcement. we will be monitoring both very closely. by the way, if it is a quarter point, will that be enough of a cut?
we will ask how these cuts may just be the beginning. right now, when it comes to spending, it is a big worry. for a nation $22 trillion plus in debt, it does keep the borrowing costs down but for how long? whether you are the president or any of the folks who want to be president, you should be paying attention and talking about it. but no one is. so the first rate cut right now that's getting a good deal of attention and it is expected to happen, as i say, in about an hour, when the federal reserve signals that it is reversing course here on a direction that had been at least since late 2015 i think up, up and not away, but more close to what they consider to be a rational level for rates, even though historically, even now, we're way below where we should be on those rates. we've got "wall street journal" james freeman, former jpmorgan chase chief economist anthony chen and former dallas fed adviser danielle dimartino booth. danielle, we begin with you.
what are you expecting first? >> well, i think after one of the fed head officials, john williams of the new york fed came out and intimated in a paper that there might be a 50 basis point cut, half a percentage cut, the damage control that's been done since then to walk that back, starting with the new york fed spokesperson, and even during blackout, even over the last ten days, it felt very orchestrated. we had janet yellen on the wires yesterday bill dudley had an opinion piece out. neil: janet yellen advocated a quarter point cut, right? >> she advocated a quarter point. bill dudley saying quote, unquote, one and done. the fed is hoping this is not 2001, that this is not 2007, but that this is 1998, and that they can put an insurance rate cut in their words out there and have that alleviate some of the tension in the markets. neil: that was the devaluation, right? >> long-term capital management.
neil: there are two more rate cuts after that one, and that did the trick or stabilized things, right? >> it did the trick. but we were definitely in a different environment. neil: if it isn't one and done, if it's at least two more cuts, what do you factor? >> i think right now, the federal reserve really has to say they are watching the data. i think right now when you look at the domestic economy, yes, the manufacturing sector's a little weak, yes, the chicago purchasing managers index came in in contraction territory but the service sector is very very strong. i think what the federal reserve has to say is look, we are looking at trade tensions and by the way, the lack of a deal in china gives the federal reserve cover to actually cut rates and not -- [ speaking simultaneously ] neil: longer they keep this lingering, the -- >> i think that is part of their thinking. not that they are being bullied by him, but they are worried about what his trade policy is going to lead to. i think the fed has figured --
neil: you mean the federal reserve not being bullied. >> the federal reserve. i think they understand it's pretty hard to make the economic case that the u.s. economy needs a rate cut right now. rates at historic lows, businesses are not saying they need lower rates to borrow. it's the trade issue that's weighing on them. we just got new data showing that americans have been getting raises more robustly the last couple years than we thought. the consumer is very healthy. economy's still growing, although not as fast. so what they're saying, i think the idea is they've got to cut because you can't have virtue in a vacuum. if the rest of the world is pursuing crazy monetary policy, we have to go along with them some way or else our currency will get too strong and i think the fear then is that the president would take additional trade action to respond to that. neil: you know, danielle, you're the expert on this. as you know i play one on tv and i read a prompter so i think i qualify. i don't see a reason to do this. i don't see a reason. i know what's going on globally.
>> look, stocks are at all-time highs but the dollar which is supposedly not in the fed's purview, we have seen a tremendous increase. we did an analysis of all the fed minutes going back to 2000, and after 2015, and china's surprise valuation of their currency, the dollar has become much more prominent in fed discussions. what that tells you is that making monetary policy in a vacuum when your president is being told the euro is 23% overvalued versus the dollar, it's not going to work. especially when we know the ecb has led the fed in this particular cycle. neil: we have changed the guidepost then for this, right? >> oh, yes. neil: is that why? >> but there will be -- the vast majority, i think norway is, i actually tweeted it out this morning, who's not cutting rates right now. the answer to the question is norway. so we are in a full-blown currency war that the fed is going to formalize today and the problem is if there's this race
to the bottom where you have to keep answering what other countries are doing, which is absent from what's happening in the u.s. economy. neil: all right. now, something i thought was interesting about the wages, much more robust than earlier thought with some of these revised numbers which were running well beyond the 2%, so you could make an argument per what james is talking about on the wage front, the fed might be choosing a bad time to do something. if you are worried about reigniting inflation and maybe they're not. >> right now, when you look at the core personal consumption, it's still well below 2% but if you look at the dallas fed, they are basically at 2%. so depending on which inflation indicator you pick, you can say well, they are below the target or you could say they are very close or at the target. neil: the genie can't be a little out of the bottle. once it's out there, it's out there. >> once you take the toothpaste out of the tube you can't put it
back inside. and right now, inflation -- >> right now, by the way, wages should be going up. neil: i agree. i just would keep my powder dry. that's all i'm saying. >> they don't have any powder to keep -- i mean, the last rate easing cycle went through 5.25 percentage cuts of points. they have 2.25 to start with today. [ speaking simultaneously ] >> just to be clear, if you're debating whether to follow the rest of the world's model, it's not working. these are economies in europe and in japan that have been trying for years to revive themselves -- neil: they want a little inflation. france and germany have negative interest rates. it's not helping them. >> one important point, if you look at the fact that the major central banks, the bank of japan, the european central bank, are getting ready to start partying. it's not the time for the united
states to basically say we're not going to put some good stuff in that punch bowl. that's another -- neil: i don't understand. we have the punch bowl. they don't. >> well, the european central bank is saying they are getting ready to lower rates as early as september. the bank of japan has interest rates again in negative territory and is ready to -- neil: that's all i'm saying -- >> no, they have created decades and decades of stagnancy and the rate at which european bond yields are trailing into negative territory. neil: do we want to imitate -- people following my dietary advice, bad move. i'm just saying why are we so hell-bent on trying to outdo the europeans at sucking? >> right now it's the dollar. it really, really is the strength of the dollar and the effect it's having on our exporters. neil: this is all a trade thing? >> but you can't -- you can dismiss how small the manufacturing sector is in the united states. but you can't take away from what trade does on a global
basis, how it affects port activity. we are seeing that shrinking. neil: it's not exactly happening with the europeans or the japanese. what are we going to learn from that? >> if you look at the dxy it's up over 2%. neil: what is that? >> the trade-weighted value of the dollar. it's up 2%. is it hurting us? absolutely. look at apple. apple already said because of currency, they lost about $880 million worth of revenue because of the weakness -- neil: they're not exactly hurting. >> i didn't say they were but that was a reduction. that means their revenues would have been higher if somehow the chinese hadn't weakened against the u.s. dollar. f neil: if this is driven by trade and the dollar and currency, if your goal here is to weaken the dollar, let's say that succeeds, you weaken the dollar, that's a hell of a goal. >> it's a terrible goal. that is not the way to become competitive. you become competitive by inventing things and being more productive and efficient. you don't become competitive by
destroying the value of your currency, which we have been watching this real world experiment not working overseas for a decade, and now we for some reason tend to follow it. i think maybe that's the fed overthinking. do their job. manage our currency, be a central bank and don't offset mistakes you expect politicians to make in trade policy. if you cut rates because of uncertainty, you would be cutting every meeting, right? neil: in the meantime, danielle, we have this overhang, the 3.8 trillion we're left with, they have been tapering this down, winding this down, they might stop doing that. >> i expect them to stop doing it. neil: that's a one-two punch for stimulus, right? >> it would be, but you start to worry about whether or not trump is going to clue in to things such as well, if the fed was double tightening when it had quantitative tightening, shrinking its balance sheet, going on concurrently with rate hikes, why can't i have my cake
and eat it too, why can't we launch quantitative easing with rate cut. these things could happen depending on what happens in the economy and with the trade war. neil: are you worried that again, the number of arrows in the quiver, precious few -- >> oh, my gosh, yes. neil: if this doesn't work, then what? >> then you are fishing on a really big string. instead of monetizing 2.8 trillion worth of debt which every dollar, the fed cannot roll off of its balance sheet, is de facto debt monetization. they're buying u.s. treasuries at auction. i don't want to see this balance sheet blow up. japan's balance sheet is 103% of their economy. that in germany is 40% of their economy. ours is 17%. let's keep it low. neil: germany has negative interest rates. >> and germany has negative interest rates. great for the sovereign but german banks have been slaughtered in this kind of environment. neil: be careful what you
unleash. >> we have to be very careful but keep in mind right now the federal reserve was already on target to stop quantitative tightening by as early as september. neil: over 4.5 trillion or -- >> 4.5 trillion was the peak. >> it's been coming down. remember that right now, banks need a lot more money than they did before the global financial crisis. they can't bring back reserves to where they were before. neil: all right. guys, stay there. i would like to talk to you about this stuff. also in washington, not so separate from this, is the measure which keeps everything going and both parties apparently happy with it even though it's going to increase our spending and way beyond caps we thought were firmly in place. then you have what the federal reserve is doing. after this. let me ask you something. can the past help you write the future?
maybe you did that and made money off of health care but our job is not to run a for-profit health care system. >> why do we have to be so extreme? why can't we give everyone a health care as a right and allow them to have choices? i'm starting to think this is not about health care. this is an anti -- >> i don't understand why anybody goes to all the trouble of running for president of the united states just to talk about what we really can't do and shouldn't fight for. neil: all right. night one, he was the name not mentioned. joe biden of course will get his chance tonight when he and kamala harris are remeeting, so to speak. hillary vaughn with the very latest. reporter: former congressman beto o'rourke is inside at the restaurant behind me meeting with voters trying to capitalize on his spotlight or his time
onstage last night, at last night's debate. i asked him on his way in if he's worried about former vice president joe biden upstaging the work or the time he got in front of voters last night by being onstage tonight. >> a community that's not visited often enough, making sure the people here are in the spotlight. i'm listening to their concerns, incorporating their life experiences and some of the solutions that they're about to bring to the table. i'm here to listen, to learn and reflect that back in the campaign. reporter: last night was a tug-of-war between leading progressive senator bernie sanders and senator elizabeth warren and a squad of moderates. that strategy may have worked for some like former congressman john delaney whose coampaign tells fox news they received a ten-fold increase in fund-raising following last night's appearance. tonight, former vice president joe biden will take on senator kamala harris for round two after their fiery showdown at the first debate in miami.
but they won't be the only ones onstage. senator michael bennet will be, too, and he tells me he's tired of his party pitting progressives against everyone else, saying that is not a winning strategy. >> i've got completely different experience of the vice president. i think it's time for a new generation of leadership. one of the things i get sort of wary about sometimes is the way this trope progressive gets thrown around. rather than throw these labels around, what i hope voters will do is evaluate each of us based on the experience that we've had and the proposals that we're making and make a determination about who's most likely to unite the democratic party. reporter: biden is doing the debate prep a little bit differently this time, reportedly working with a smaller study group of advisers who are not trying to overprep him ahead of tonight's debate. but other candidates have a different approach. entrepreneur and philanthropist andrew yang posting this video
of him shooting hoops with his adviser in advance of tonight's debate. neil? neil: no matter where you stand on this, whether it's the republicans' preference to spend more on defense or democrats' to spend more on non-defense items, the fact of the matter is they are spending money we really don't have. $22 trillion in debt and more of it coming to the tune of $1 trillion plus, more in spending than what we are taking in for at least the next couple years. this president, by the way, who is a frequent critic of barack obama, is piling debt up at a faster rate than barack obama and if he maintains that pace and does get a second term, he will break all records of all presidents who have dealt with this very issue. that doesn't get much discussion here and that's a worry when you have an environment where we are going to continue to feed the beast with more interest rate cuts. let's get the read on all this with james freeman, anthony chen and danielle dimartino booth. you know, the worry here, whether it's republicans criticizing democrats for overspending or democrats
criticizing republicans for doing the same, they both do it. it's out of control. and the fed is supposed to be kind of like the adult at the table. i don't see any adults. >> i think that that is one of the reasons the fed wants to be insistent that today is just going to be a quarter percentage point and then they are going to back away because -- neil: you think they back away? it's one and done? >> jay powell, remember, jay powell is a republican. people sometimes forget that because he's being attacked by a republican president. but jay powell -- neil: he's going to look like he caved, though. >> not for the quarter point. neil: it's not going to be just a quarter. >> i don't think it will be 50 today. neil: no, no, not today. i'm just saying he will lay the groundwork. i'm not here to judge whether that's wise. just to say it's going to continue. >> but it facilitated one of the largest expansions of the social safety net in the history of the united states. zero interest rate policy did. but there was no penalty. there's no penalty to bringing on all this debt, if you can say
i don't have to service it because it's free or even better, negative interest rates. but that's not what america's all about. by the way, it's $22.5 trillion of national debt. neil: but who's counting? >> i am. neil: to be fair about it, you know what worries me about this? anthony, i would be curious to get your take. we have known each other for decades, through a couple of recessions. i do remember double digit primed. i remember 21% prime rate. i remember my wife and i getting our first mortgage at 13.5% and thinking how brilliant and prescient we were. people forget that. people forget that. i'm just saying we're not over that just because our recent recollection isn't of that. this is the kind of stuff that spurs that. that's my worry. >> i think if this gets out of control, of course that could happen. neil: it's already out of control. >> remember when we were much younger, my first mortgage -- neil: speak for yourself. >> my first mortgage was 14.25%. if you go back then, most
central banks didn't have an inflation target back then. today, even some of the emerging market central banks have inflation targets. so to assume you are going to go back there, i don't think you get back there. can you get higher inflation rates, absolutely. neil: you know i get nervous, history doesn't repeat itself but it rhymes. this is rhyming with sloughing off all of these threats. >> knowing that history, it is weird to have central bankers now with this global consensus that their main job is to raise inflation. it has to make you worry when you look at history. neil: we want inflation. that's our goal. >> right. i mean, how insane is that, that it should be the goal to make our money worth less every year. it's been declining in value but they want it to decline faster. that's part of the rationale. >> you want your dollar to disappear. >> history tells us --
neil: we know in this environment, you know, with the debt and deficit not an issue for voters, not in the top ten list, it's clearly not a worry, they feel emboldened, i think, to continue doing this. democrats and republicans. i'm wondering eventually the music does stop. i know people here, what a crepehanger, never trump, but i'm saying this is something we have to pay attention to. eventually the lights go out. >> had the federal reserve not monetized the debt, i don't think the modern monetary theory crowd would have such a strong leg to stand on but they are able to say look, the fed did it, there are no repercussions at all so we can spend whatever we want -- neil: i actually had someone tell me the difference between us and some of the developing countries, we can print money. imagine that. to say oh, that's right. >> because that's american. >> i agree with all this, but remember, the federal reserve or
any of the central bank is not targeting inflation at 13% or 14%. you are looking at 2%. neil: you remember how quickly that happened? remember with richard nixon how quickly it happened? remember jimmy carter, how quickly? before we even had a chance to talk about the worry, outside events lieke opec and the oil crisis, we were rocketing. >> during the nixon years we were arguing about changing the inflation statistics to make them look better. today we are actually -- neil: i was too young. i don't remember that. >> we are looking at experimental inflation that's going to make it higher, not lower. >> there's no government that ever intended to create hyper inflation or even high inflation. neil: it always happens, call it an outside aberrant event. it happens. will it happen again? >> we'll see. if china gets strong enough ar t after the next global downturn, they might unseat our dollar. neil: we'll see. that's what my father used to say. it was always no.
>> we'll see. neil: we are watching this closely. the dow is up about 19 points. the betting is in about a little more than a half hour from now, they will be one quarter point lower, interest rates. we shall see. r and is the fastest growing place to buy a car in the nation. it's because we have thousands of people working hard to make our customers' experiences the best. it's because we have tens of thousands of cars ready to be delivered to your doorstep. and it's why hundreds of thousands of happy customers have ditched the dealership and bought their car online, earning us an average 4.7 stars in the process. so if you didn't know about us before, you do now. we're carvana, and we want to give you the car buying experience you deserve.
neil: new concerns that the capital one hacker, page thompson, may have data from other major corporations. in other words, way beyond just this one. we will get to the bottom of that a little later. meanwhile, it's not all sad on wall street. a lot of what's driving what has been a pretty strong market all this year, earnings, apple the latest case there. jackie deangelis following all of this from the new york stock exchange. jackie: good afternoon, neil. let's start with apple because that stock is off the charts today. after earnings blew past expectations and the company raised its guidance for the fourth quarter. iphone sales, they were slightly lower but that was expected
because there is a saturation in the market. in fact, it's the transition to services that investors are really excited about and talking about things like the news service, gaming service, the credit card, tim cook said that's coming in august. services revenue actually just missed targets but investors didn't really seem to mind since everything else was good. meantime, apple's a good barometer for china, too. remember what happened when apple preannounced in january on concerns about china? it doesn't seem to be an issue now even as trade talks with china will resume in a month. on to ge, also a beat. industrial free cash flow seems to be strengthening. the ceo said that stabilization came from improvement in the struggling power business. ge raised full year guidance by a nickel. still, that stock turned negative on the session, although now it looks like it's trading up again. concerns about the 737 max jet grounding. meantime, humana, last one, strong earnings, raised its full
year profit guidance. this as there's a lot of questions, as you know, about the fate of insurors as some democrats out there talking about medicare for all and eliminating private insurance all together. back to you. neil: i did notice a couple of them trying to dial that back. we'll see what they advocate tonight. all right. the senate is set to vote on still more spending. both parties agree this is a way to keep the government lights on, raise the debt ceiling and not worry about this for another two years. that sounds fine. here's the deal, though. $2 trillion in added debt. after this.
neil: all right. the action hasn't been all centered around the federal reserve today. the senate is putting up a big spending bill today. both sides aren't tackling this enough according to my next guest, the former reagan budget director, david stockman. this is a debt ceiling measure that sort of i guess punts on this for another couple of years. then they will regroup but by then, we will have another $2 trillion in red ink. obviously you're not a fan. >> yeah, i mean, today is a peak moment of lunacy, both at the fed and on capitol hill with this budget bill. you know, we are at month 121 of the longest business expansion in history. by every economic textbook ever written, you are supposed to be reducing the deficit, actually running a surplus.
we actually had one under bill clinton, of all things, in the year 2000 at the end of the 1990s boom. today, we are going to have $1 trillion going up this year, 5% of gdp, and we are heading for a recession. nobody outlawed the business cycle. we are going to have a recession. the deficit will hit $2 trillion in the early 2020s. we will end up not with a $22 trillion deficit that everybody kind of ignores but a $42 trillion deficit by the end of the next ten-year cycle. the fed is making this possible. it is basically euthanized washington. they think they can get away with this kind of debt building year after year and these massive amounts because it doesn't cost much, because the fed is keeping interest rates so sub-xh sub-economically artificially low that it's put the politicians to sleep and it's done the same thing in the
c-suites of corporate america. they are borrowing hand over fist but not to create jobs or new capacity or new efficiencies, but to buy back their stock and do ridiculous m & a deals. we are burying the country in debt, $72 trillion public and private. that's what the fed has done. it's enabling the politicians to go on this kind of debt-fueled lark and it's not helping the main street economy. we are in a pretty bad state of affairs, i would say. neil: i will put you as a maybe on the state of washington. one of the issues that was raised and maybe it happened in the last meltdown. ben bernanke comes on board, he's all of a sudden looking at a depression, he's a student of the depression, he studied it exhaustively. the federal reserve did all these unusual, unprecedented things like buying up treasury notes and bonds and quantitative easing. this president has said that changed everything and he wants the same thing that barack obama
had, the same sort of, you know, accommodative federal reserve that will be keeping rates low and forcing them down to zero, then we would be off to the races. what do you think of that? >> well, trump is out to lunch. he's an economic ignoramus on monetary policy. he's a bully. he's one of the forces hacking on the fed right now but he ignores history. we had ten years after bernanke's, you know, great experiment which i think was unnecessary, another issue, in which the federal funds rate was lower than the inflation rate. ten years running. 126 months in a row. nothing like it in history. negative real interest rates, that didn't help main street. it didn't help households get a mortgage or small businesses to fund their working capital. it basically was free carry trade money for gamblers and
speculators on wall street. that's all it did. finally the fed said after ten years maybe we can get the real interest rate a tiny bit positive. so today, the funds rate is 2.4, the year over year core cpi in june was 2.15. so we got a tiny, tiny 25 basis point real interest rate. i mean, that's crazy compared to history. it was 4% back in 2000 before they eased, and 2.5% in 2007 before they eased. neil: we don't have a lot of proverbial arrows in the quiver, but the one thing that bothers me just stepping way back on all of this is this notion that i have always seen the federal reserve, you know, it's not a pristine or saintly institution but i have always likened it to the adults at an otherwise squabbling politicians' table. they intervene to minimize the ravages on our fiscal policy of republicans and democrats running amok doing whatever they
want and they would rein them back in or try to temper it. now they are adding to it. i worry that even though, you know, jerome powell is going to explain that this is not in response to the president jawboning him to cut rates, it's going to look that way to a lot of people and it's going to feed the argument that the adults have left the room. >> yeah. well, you hit the nail on the head. that may have been true 30, 40 years ago, but today, the fed is the enablers. they are the enablers. you have a fed dominated by a posse of liberal keynesians who say they have been authorized to run the entire financial system not only of the united states but of the entire world -- neil: this is not that, and the stern medicine to address what he said needed to be addressed then, we don't have that now. >> no, we don't. and we have republicans and conservatives with their heads buried so deep in the sand that
it's pathetic. the threat to capitalism, the threat to prosperity, the threat to free enterprise economics if you want to call it that, is the federal reserve. it's the 12 people sitting there as a monetary politburo giving themselves the right to run the economy, pretending after free money for ten years that they're going to take out an insurance cut because they think they can make the economy better. they're not going to make the economy better. we've had this massive expansion of the fed's balance sheet, as you mentioned, $900 billion at the time of the crisis, peak 4.5 trillion. what did it do for growth? 1.6% real growth through the last 11 years, half the rate that we had in all the previous cycles, including under ronald reagan in the 1980s. so it doesn't help main street. households are now, you know, in peak debt. 15.6 trillion in debt.
businesses didn't use the last ten years to delever. they took their debt from $10 trillion to $15.5 trillion. we just buried the economy in debt. that's what these fools have done. have we heard one republican politician have enough sense, you know, to call a spade, a spade, to sound the alarm? this is the real threat. it's not, you know, the four people in the squad or even the socialists who were debating last night who could spend more money if they get elected president on the democratic ticket. that's bad enough. but let me tell you, long before we get there, you have the fed that is really taking this economy down. it is a threat fundamentally to the main street economy. it's killing wage workers. it's a terrible thing and they are doing it because at the end of the day, they are deathly afraid of a hissy fit on wall
street. they have created a speculative monster and now they are afraid to face it down. neil: think about paul voelker, he knew when he was raising rates one full point at a time, the markets will go crazy. i don't give a damn about the markets. i'm not going to count that. that's a very different mentality than what we see today. david stockman, always a pleasure, my friend. thank you very much. what i love about you, dave, you tick everybody off. democrats, republicans. thank you very, very much. we do want to let you know that $3.8 trillion to which david stockman was referring is the amount of money, you hear a lot about this quantitative easing that was going on back at the height of the housing crisis and meltdown. the federal reserve under ben bernanke, with the best of intentions, to try to stave off a depression, essentially was buying every treasury note, bond in existence, buying them all up, forcing interest rates down to near zero, where they sat for the better part of a decade. with the goal being that we will
eventually undo that, we will unwind that, sell the securities back, everything will return to normal. the indications today besides the quarter point cut that you have probably heard is well telegraphed, is that they will say of that $3.8 trillion, we are going to stop winding it down. we are going to ignore that particular debt. that is the bigger story hidden stave off the s, that we are depression and get out a lot of money in the system, cease, stop, move on. here's the worry. history proves you can't. after this. i had to quit. for real this time. that's why i'm using nicorette. only nicorette gum has patented dual-coated technology for great taste. plus intense craving relief. every great why, needs a great how.
about this danger of following the market's tune and tone, telling maria bartiromo not that long ago they sent a signal they were going to be dovish, the federal reserve, and cut rates. they doubled down on that over the course of the spring. now they are in a position where to some degree, the fed is probably afraid if they don't now deliver on the rate cuts, it's going to cause another bout of volatility and they don't want that. that is the curse, he says, of paying too much attention to financial markets when you do monetary policy. charles plosser with us now on the phone. i thought that was a brilliant comment and scarily accurate. i'm wondering if we are falling into that trap now. >> well, i think there is certainly a risk of that. i think as you said, the fed has kind of talked itself into a corner here, where i think it pretty much has to deliver on the 25 basis point cut today, because they will be afraid of the market reaction. but you know, that's just part of the challenge they're facing.
they've got themselves a lot of trouble, partly their fault, partly others, but trying to disentangle themselves from all this is going to be quite difficult. neil: if they disentangle themselves as well from paring down that $3.8 trillion that sits on its balance sheets, that was originally there, more than $4.5 trillion, to stave off a serious recession, if not some feared a depression, and they just leave that alone, what do you make of that? >> well, i think that poses its own set of risks. they could leave it alone but they then have to explain why they are leaving it alone, why in the crisis they increased the balance sheet so much and instead it was providing monetary policy accommodation, and now if they leave it alone, well, how much accommodation are they still in place with the balance sheet? they have to explain how this
would interact with their interest rate policy. i think there's lots of 'splaining to do here and the fed hasn't met that test. not saying it's easy. but they need to get to work on that if they are going to maintain their credibility and explain how monetary policy is going to work. neil: maybe they do that and you know, some minutes from now, but i am worried about when you do the market's bidding, be careful because we even learned at the time of the meltdown, remember when congress failed to vote on t.a.r.p., the troubled asset relief program, this was still under president bush and they tumbled better than 770 points on that failed vote in congress, then seeing that reaction of the markets, congress scurried back, voted on that, only to see the dow in the ensuing months fall another 6,000 points. so the trouble with doing the market's bidding, you are doing their bidding in the moment and you don't have any idea longer
term the risk you are posing way beyond them. >> i think that's right. the fed and policy makers in general, not just the fed, need to take a longer term perspective on things, and not react to short-term events and short-term volatility. i think even in this episode we are talking about today, it started with a bout of volatility in december with the market. i think the fed overreacted to that, it began signaling they were going to change course and cut rates and they continued to do that through the spring, now they've got themselves in a position where they feel like they have to, they probably feel like they have to, yet the economy really hasn't deteriorated that much, and the uncertainty that is affecting the economy, the policy uncertainties, whether it be about the future of trade or the future of europe or whathave you, the fed can't do anything about those uncertainties. it can't changed those uncertainties. and it can't offset bad policy choices or outcomes from foreign
governments or our own government. and i think this notion of insurance, it comes with cost and is far from free. and i think that they run the risk not only of instilling their own volatility, but running the risk of having people believe, depending on where you stand, you are either succumbing to market pressures or political pressures from politicians. so i think this is a very troublesome spot for the fed and it's of concern for the institution. i think the fed's made its share of mistakes but i think, you know, irresponsible fiscal policy and congress who want to offload the blame for anything that goes wrong on the fed, this is not a good place to be. blame the fed. neil: or blame you, charles. >> blame me. neil: for no reason at all. charles plosser, the former
neil: all right. you didn't hear it from me, but apparently we are moments away from the federal reserve move. it could be the first cut we've seen in the better part of a decade. let's get the read from "after the bell" cohost connell mcshane, "evening edit" host elizabeth macdonald and dagen mcdowell. if the consensus is we see a cut, the only issue is do we see more after that? a lot depends on what powell says afterwards, right? >> correct. probably more, if you look back at when the fed did not foul up and made -- in 1995 and 1998, they made three small reductions
over a few months and -- neil: that was it. >> it was an insurance policy. '98, remember, you old coot, think back to '98, there was an impeachment crisis, there was the russian debt default and long-term -- neil: why do you assume i don't remember any of this? >> because i'm 20 years older than you are. neil: no, it's the other way around. but that's fine. the rap against the federal reserve doing this is we don't have to do it, that we are pretty strong, economy is chugging along nicely and we're just trying to mimic what the rest of the world is doing. fatal mistake. >> remarkably absurd, to my personal opinion, if you wanted it. what do we want? does the president want negative rates in europe? and where they had slow to no growth? that happened last decade. 11 years on, we have had 11 budget showdowns, we doubled the debt, we had, you know, a lot of fed action and we are still at 2% growth. so what is keeping inflation down? it's oil, nat gas, amazon,
right, cheaper products, you know, robots. so there's a lot of forces in the u.s. economy and we know that the trade fight is tamping down business investment. i don't see weakening the dollar improving business investment. i think the fear is that you raise rates, to dagen's point, you will have more long-term capital management. neil: it will continue the froth. >> i think you're right. >> that trade fight probably has a lot to do with what will be happening today and what will continue to happen. all the indications we have from the talks in shanghai is everybody expected, is we are really going nowhere fast. i don't think anybody expects us to be going anywhere fast. neil: the longer this is unresolved, the more rates would probably come down. >> but i think there's motivation on both sides. everybody keeps talking about how china's trying to put this off until after the election. i have been seeing, i keep getting indications from the president himself in his tweets and comments that he's maybe motivated to do the same, to avoid the democrats being able to go after him and say hey, you are being soft on china. if he can get the fed to keep cutting rates, prop up the economy, at least not go into
recession -- >> but will they? >> i don't know. but if they do and he's able to buy himself time, maybe he has the same motivation to put this off until after november 2020. neil: well, the other argument is that it's going to be prevented. in other words, if you do something like this now, you don't have to exhaust all the arrows in your quiver later on. not that we have a lot. what do you think of that? >> potentially, but i point out we are a consumer economy that long-term mortgage rates are down to lowest level since, what, 2016. they have fallen from almost 5% last november to 3.75% now. so we have already, because long-t long-term rates have come down in anticipation of the federal reserve doing something, the consumers could already benefit from that in the housing market and through refinancing which we have seen. neil: not robustly responded that way, right? housing data and related data? >> right. because wage growth has been tepid because we don't have
neil: data shows incomes are picking up. >> let me back up. you would want higher wage growth, right? that would prop up inflation. neil: you don't see inflation? >> no. what i'm worried about the federal reserve has a political antenna picking up messages what it should be doing that is going on in in on europe. europe has slow growth with negative rates. i'm not sure we should do that folly. paulson said, bush's 170 million-dollar stimulus, fed rate cuts will help. we're still where we're at. stop monkeying around. >> i don't know they're being pressured by trump to do something and please the president or james freeman brought up earlier which was interesting way he said it when he was on with you, don't offset mistakes you think politicians will make in the future and that
might be to some extent what the federal reserve is doing, trade and things trying to make up for that. >> when you have short-term rates higher than long-term rates in the three month versus 10-year, you make it impossible for banks to lend, make money. they have to fix that to cut short-term rates. neil: they will fix that we're about a minute to deciding that. charles payne to lead you through that. charles: neil, thank you very much. good afternoon, everyone, i'm charles payne. this is special edition of "making money" right now. we're moments away from the federal reserve's decision, a highly anticipated decision. the investors expecting the central bank to cut-rate, the first time in more than a decade. right now the conventional wisdom says 25 basis points. we'll see. before we go to edward lawrence, introduce the all-star panel to break it all down. we have neil cavuto, maria bartiromo, stuart varney and lou dobbs. while a rate cut is anticipated,
the question all investors really want to know, where does the fed go from here? will bernanke go back to fix mistakes that he made. will he tell wall street this will keep going, the 10-year expansion. let's go to d.c. reporter: federal reserve cuts interest rates a quarter percentage point 2 2% from 2.25%. there were two dissenters. rosengren and esther george both agreed to keep rates where they were. the federal reserve would stop the roll off of the balance sheet two months early starting on august first. the distinction, treasurys will still be reinvested as they're matured. that leaves the balance sheet at $4.2 trillion. the fed is making a cut in the the rates in light of implications of global