Sep 20, 2013|
Professor Peter Ireland, Professor of Economics at Boston College, on the Fed
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
We have a college professor joining us. -- don't -- and I love the academics who have been because it's all theoretical right. But this is a college professors name's Peter Ireland he's a professor of economics at Boston College. He's also a research associate at the National Bureau of Economic Research these guys are important because they are the ones they call recessions right we'll save you. Yes we went into recession or we came out of recession as of this date right so. These -- -- it's a very in Boston College is a wonderful academic institution but the fact that he's a member of the NBER. Huge the answer and he's gonna join when he when he had ten different oh yeah a couple minutes it was. Is gonna come on let's look now that that's gonna be very helpful and he'll help us understand the data did want to mention. That our sponsor of this. Program today is a company called Cushing and dole they are estate planning law firm he did they provide basically legal services. 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OK I wanna run through a couple of Islam. -- attacks are sure now it's really interesting because I'm telling you people who who are treated me -- at kkk arrogant by the way -- and those folks were overwhelmingly saying no I'm not better five years ago this is eight point seven -- five years ago I was unemployed and now I'm working pistol and yes I am better -- six years ago I was making a lot more money. That I am not seen it in this comes back to this whole idea of looking further than the surfacing numbers and -- some of these and we talked about a number we did national income numbers in writing comes our. Dramatically depressed from where they were back in 2007 to the same your message that we we has -- you know I'm just what I wanted to -- it. And the talk this morning is that this tapering will not start until unemployment numbers around -- 65 you know parks have a theory for how long. That that's seems to me like that's a long way away well and that's a great question and that's why we we bring in the heavy week. And a day like that's hardly bring into the college professor and. His name's Peter Ireland he's joined us on the program before more importantly he's a college professor BC which is terrific. He's also a an associate research associate at the National Bureau of Economic Research. Peter good morning and welcome to the show. Thank you very much for having me. So you just heard the question. In terms of tapering. Windows did begin it gives you kind of putting it out there we we're hearing number six and a half percent unemployment. We're hearing 250000. Jobs created. Their Boston College. Right that's an excellent point and I think it's -- when it -- you're absolutely right. But on the other -- it is -- important nuance. To beat -- couldn't put colonel you defensive poverty initiative. We recently -- probably under broad headings. Maybe there's -- low -- straight policy short term interest they sit in the rocks near -- Since 2008. And the question becomes when you're a going to begin -- -- Harry beat you there's the issue of R&R. Which -- extremely long term interest straight. And from the -- mortgage market. He thought long term -- Decision that got postponed yesterday. With the tapering off. -- -- -- policy under the second IR and and so unimportant in August but coach and a half percent -- you're absolutely right were -- legally he unimportant in practice six and a half. I would be next year or the year after the early. But it what are they can I wanna go back to your point about interest rates the Fed only controls. Short term interest rates. Answer it directly they didn't manipulating. Long term rates on treasuries and mortgage backed securities through their bond buying program correct. That's exactly right and so another way of looking at it is -- -- in addition to -- -- it -- print. Instead control short term. Quite direct it correctly and accurately. Under term rates flat so and that's what our bases in Iraq. So when do you speculate. That they will lose -- start to taper or. Eerie because there there's also a theory out there that they'll stop buying treasuries but continue to buy mortgage backed securities do you -- do you subscribe to either of those. -- yet got an excellent question to. I think important being that you keep in mind when interpreting yesterday efficient. Is is that although it's every bit by surprise. Is actually a march don't want to say when -- -- He'd -- was talking about. We didn't think he should arm bar and emissions that actually and it goes act like in two chat. Over a period of months -- even over a period of years. So what's at stake yesterday it is they were simply didn't believe that storm that all of this I mom or -- We we get more information about really strong recovery might be. The Gigabit it's been on a lot being there I believe that while we were talking about incurring an outward not and -- he -- more. -- -- The anything -- to any. Any thoughts in terms of bonds rally yesterday was at a response. Do it because I saw the tenure go from about 29 -- has been as high as 3% and meets at about 217 now. Is that sustainable state to seventy for another six weeks or so. That throughout our -- on him and I wouldn't be teacher write the reaction. I got. But my suspicion -- -- being in the it will. From yesterday's meeting to -- -- wise -- I'm twenty members. -- work are concerned about the back up and -- -- -- -- -- being over the past several months he can certainly. Much about Andre. Say it about the tactic mortgage a yacht for a long bond rates and it was beginning to permeate. Did they increase in mortgage rates are the initial screening and part entry. An excruciating mortgage activity. Let me K -- I wanna ask you this question because that's just it came to the top of my mind. It there's two sides to every trade professor. Right -- you've got people that are benefiting from these lower rates who is that that would be people that own -- home or refinance or purchased a home. And it would be a company that has issued new debt -- as they're able to do that it artificially low rates. Conversely. My mom and dad were in their seventies and would like to go to the bank and buy a CD with a 5% return they'd been penalized right. So -- -- -- -- tell us EU -- when you're teaching your economics class over their Boston College. Immediate you have to recognize the good people some people are losing out on us. Absolutely. And that is one of the most controversial aspect what the debt is in doing. Going back court kitchen that in eight what you would -- is policy actions they. How everybody where these are some people and hurt no. What -- third minute of eating long term interest rates or any other -- -- any other market. Winners and losers will result. Now you know -- -- Peter -- a professor thank you very much and and I got a busy schedule the kids are all back in school now so. Your -- your your probably chock full of core classes to teach today thank you. Thank you very much. I think they care and that's not professor Peter Ireland.