Henry Curr (The Economist, Market Volatility)


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

I. This segment of the financial exchanges brought you in part by the US Virgin Islands economic development authority hurricanes Irma and Maria. We're devastating but the islands are already well on their way to recovery. If you're looking to start relocate or expand your business the US Virgin Islands as one of the most competitive business locations in the Caribbean. Take advantage of incredible tax incentives that are fully sanctioned by the US government for more information visit US the high. EDA dot war. Joining us now on the line is Henrik her from the economist here to talk. But the volatility that we've seen in the market in what is going on in terms of fiscal policy Henry thank you for joining us. And let's talk a little bit about that the changes that we've seen in the last three months from a fiscal policy perspective. How much additional deficit to re taking on over the next couple years compared to where things looked like they were heading. Just a few months ago. Such an important debate it that the outlook we already know right. America's aging I mean is spending more on Social Security more met attack I'm deficit. Oh well when we're not coming down that and then we added tax. But there about one point 5% of GDP. Quite yet to be out there and nine to go yeah. And now we had a budget Taylor at the end of all we we what was ruled a pretty entity. Entity. Batting about point 7% of GDP the deficit that we're looking like boy beat out and ninety. America's going to be running. Pedaled it what about our. And if GDP in Portugal which is very unusual that at this point in the economic cycles when unemployment pretty. Let's talk about that what typically happens when you throw a huge bunch of money at a problem that doesn't really exist. Well. Can you be worried about typically. That would stimulate an economy whack when unemployment is Larry is that that the militants and sped it. Result in more fuel more people can watch more GDP instead that it would make prices bright ball in the economy were kind of very happy with. And when that with a strong wait number a couple of we not what that all these registered financial market. As accurate is not a wondering I don't in the technical and ordered late in the fiscal expansion. In Mac and apple veteran a hike up interest rates on not picket the stock pick perfectly that there is that. You would expect to fight but no one actually quite sure whether it be limited to the benefit down a bit of an experiment to see how bought the economy and. You mentioned that the typical federal response would be to hike rates because that's what they do in order to try to. Keep inflation under control I look at the situation in the US and I see you know obviously a significant division in terms of wealth which. Turns into a significant division in terms tax receipts. A lot of tax receipts are based on neo rich people selling stocks I also look at state pension funds and see that they need to have certain returns in order to meet their bogeys. It isn't there a huge disincentive for the Fed to raise rates though. Well. Recent at one more rate rate that it is play the economy that. If you go to fiscal stimulus coming and on the other all right then yeah about what dent. Certainly it unite out at all people like I didn't bombs or who would benefit. Acquire right. He would don't see that you know bringing an end of the year I interest rates by relying on fiscal policy mold that. Brought on on marital rate and monetary policy period not think about ticket things that aren't right. I about a of people you compensate and apple I would achieve will will the attention on on pension scheme. I won't but the traditional view would be well you want interest rates are responsible to keep it up keep co captain Beatty out. Try to investing brought that back government. Running not step it's gonna take a couple of Apatow and oversight and vehicle in the economy but about that bout that but the trade off a debt that it would and all the guys. People view a great thing that attack. And spending package being felt weak economy implement that with bank equity as an economy ticket do with more stimulus bill interest rates do come with the patent fight back. And and I that there is there is a document that are interest rates are addicted. I don't that means that when the next and don't come along the federal went up more recently popped in response. Very good Henry thank you very much of the time we appreciated today. The ten recur from the economist talking about interest rates in in light of the recent market volatility. It's kind of funny to hear you know. Economists from the left and right talk about deficit Terrell and federal eight years that. Barack Obama. Was in office Republicans railed against the increasing deficit you know the news all news just terribly ski selling the country down the road. Because the deficit I think during of the Obama administration went from an assay. Nine trillion to eighteen trillion. Yeah I've been in that neighborhood that the big thing that you seem to see with deficits is they tend to go go up most slowly when you have divided government and yet the thing about the times where you've seen deficits go up the most. This year him. You've got an all Republican administration. First year of the Obama administration all Democrat ever think about it's it's the times where you have divided government where they go up most slowly but they my point is that. You know. The people are afraid of these deficits in one of the things you might want to do to try to understand with the truck administration is doing. Read up and learn and educate yourself. As a relates to modern monetary theory M&T. His M&T has been a proponent of deficit spending for twenty years saying that you know your growth is based on the government spending. The other the one thing that I've kind of come around to that you see is that wall a government with access to the printing press and won't default nominally. They can still default in actuality when you say okay if we have to take a twenty or 30% hit our purchasing power you can still get hit by that even if you still have. You know the currency still in effect.