alix: i'm alix steel. joe: i'm joe weisenthal. welcome to a special one-hour edition of "what'd you miss?" on today's the decision. alix: we want to get to julie hyman on the market action. it ended flat on the day but it was a very intense afternoon. julie: yes, it was. a lot of volatility through the afternoon in all asset classes, really. we talked about stocks and treasuries in some detail so i want to talk the other asset classes. currencies, which you talked about a little bit, but i want to redirect what we said -- reiterate what we saw could account rising versus the dollar. it is interesting, this action here.

the dollar is falling along with rates in the break of the press conference. janete the fact that yellen talked about strength in the domestic economy that concern in the global economy -- that seem to be one of the takeaways from today. remember that the dollar has 16n the best performer vs. developed nations, its peers, over the past year. vs. a basket of currencies and the gyrations through the end of the day. finishing down by about 1%. remember also that yellen reiterated we are going to see a gradual trajectory when rates begin to go up and another reminder that again the trajectory here is that rates will eventually go up probably nationshan we see other raise rates, for example. some strategists are saying for the longer term that the dollar could be good bet. one of the assets were we saw it

pop today, gold prices. 1% from a dramatic increase when we got no increase in rates. as yellen emphasized, uncertainty is still sticking around here, so if you are looking for a haven, that is where at least some traders were looking today. alix: thank you so much, julie hyman. a deep to take a look at dive in the bloomberg terminal and i want to take a look at what the market is expecting in terms of federal rate hikes. the green light here is the current implied policy curve on the sort of yellow dotted line is the historical implied curve, historical meaning yesterday. you can see that in one day, joe, the expectation for what the fed funds rate will be for the next month came down by about five basis points, up 15 basis points over three years. if you go back to july, before the china devaluation of the yuan, you can see how much

expectations have come down versus now. joe: that is a great chart, really tells the story of what is going on. i want to dive into my terminal and look at the vix. one of the things that was cited was the heightened market volatility. after the announcement, the vix really dies, but in a mirror image to the stock market, the same way the stock market gains were essentially erased, the vix basically went back to unchanged on the day. at least for today, again, it is a mirror image of the stock market. people aren't totally sure what is going to happen, people aren't totally confident that the dovish move will be good for stocks. vix ended up climbing any race to the losses. -- and he raised the losses. alix: now we want to turn to the labor part of the picture because data had been sh owning that the recovery is lousy unless you are richard only those whose incomes are high to begin with have seen improvement. joe: fed chair janet yellen

addressed the fed's role with income inequality at her news conference. ms. yellen: to me, the main thing that accommodate of monetary policy does is put people back to work. putting people back to work and a labor market that has a disproportionately favorable effect on vulnerable portions of our population, that is not something that increases income inequality. joe: joining us now from washington is tom palley, a senior economic policy adviser at the afl-cio and a research associate at the economic policy institute. and mike konczal, a fellow at the roosevelt institute. thank you for coming on. mike, were you happy with what the fed did today and do you think the fed is on the right track for ameliorating the inequality we see? mike: absolutely. i think today was the right call pit with inflation though and

perhaps falling and wage pressures of beauty, as we saw from the census data that came out this week, wages have not grown, certainly not grown fast, either, there is no reason or ates one to put raised r the table now or even in the immediate near future. as we saw from the graphic from the bloomberg terminal, if you raise rates to really, you are going to be raising rates too early throughout the next several years. it is telling that the rate for came down along the whole curve, which is important for investment. alix: tom, however, we did hear janet yellen talk about the fact that the fed can do nothing about income inequality. should this not be amended at all for the fed? well, it is not good should continue to not be amended? -- well, it is not. should it continue to not be amended? tom: that is not the true. they can create bargaining powers for workers and enable productivity growth. the fed is important for income distributions.

wage raises when we start to get them will be very good for improving income distribution and lowering inequality. if you listen to our last guess, they are talking about the job picture looks a lot by somehan it has been, counts the unemployment rate is falling at its fastest pace of any recovery. mike konczal, you say you don't think he rate rises inappropriate in the near term or any time in your future. what are you seeing in the job market that says we have a long ways to go? mike: there is a lot of our shadow employment, people who can be drawn in by employers, people working part-time who want to work full-time. that is one important dimension. janet yellen and others emphasize it. the other is on the labor income share of the economy, still low relative to where it was in 2007. corporate profits are very high. there is room for wage growth at

the expense of corporate profits , just the kind of thing you would expect to see as labor gets more powerful, as employment comes -- unemployment comes down. there is still a lot of slack in terms of the distribution between bosses and workers that i think hasn't really been touched in the recovery and that will be an important dimension of monetary policy going forward. joe: tom, what do you make of that? looking at it from a union perspective, is there room to go in terms of gaining bargaining power? tom: absolutely. all the indications are that folksal bargaining, don't have much power right now. when i look at this economy, something your viewers probably understand, bigger demand and supply perspective. the supply-side is the labor market. there are still pretty good indicators that there is labor supply out there. yes, the formal headline unemployment rate is 5.1%, but the broader measure of unemployment, all the part-time workers who want full-time jobs

and can't find them, i think it is 10.3%. that is a long way from where it was at the beginning of the recession. belowrticipation rate is what it has been for the past two decades. lots of labor supply there. then you turn to the labor demand side, the job creation picture. that has been good until recently but recent trends come i would suggest come is a little bit of a weakening taking in-- kicking in. last month the private sector grated 140,000 jobs, i recall, which is below trend. manufacturing lost jobs. i wouldn't be surprised if manufacturing is on the cusp of a recession. they lost jobs, and the job losses would have been worse were it not for the auto sector, which has been booming. what we are seeing in manufacturing is a tremendous headwind from the strong dollar as the u.s. economy does better than the rest of the world.

that imposes a tightening on the economy. we have had some tightening already and something that has not been picked up is that the ,trong dollar means that oil which is priced in dollars, is more expensive to the rest of the world, and that helps explain why we have had some of the oil bust in our oil-producing states. there are quite some headwinds there. put the pieces together, demand and supply, and you see no inflation, no wage growth matching productivity growth, and pieces together add up to exactly the decision that chairman yellen and the fomc made, hold rates, don't move now, and even lower going into the future. alix: there is one chart going against what you are saying, tom, and it comes to us from deutsche bank. people who are available to work joba job opening is -- per opening is falling. the idea being there is not enough workers for jobs out there is the economy transforms. that's great, of

course. job openings are up and it is time for employers to raise wages. as mike was saying, the proper chairs way up what -- profit share is way up over what it has been historically. put it back in the hands of working folks, working families. employers in this country have some strange of you that -- strange view that you don't have to raise rates in a tight market. one for theber nation come economic priority number one, on the way to get there is to keep rates low, let the economy continued to grow, let market forces then drive up wages in the way that they should. joe: much more ahead with our guests, tom palley and mike konczal. ms. yellen: the recovery from the great recession has advanced significantly far in domestic spending appears sufficiently

robust that an argument can be made for a rise in interest rates at this time. ♪

alix: i'm alix steel. joe: and i'm joe weisenthal. what'd you miss? we're back with tom palley of the afl-cio and mike konczal, a fellow of the roosevelt institute. mike, i want to go back to you. before the break we were talking about how there doesn't seem to be wage pressure but we are seeing signs -- mcdonald's and walmart saying they are going to raise wages to my believe delta said they are going to raise wages, a story about ubs having trouble finding hourly workers. on their plenty of signs that the labor market tightness we want to see is happening? ike: again, i don't know if

really see it. we don't see it with corporate profits or the capital share of national income, which is one place you could see significant wage growth without actual inflationary pressures, if workers got more of the surplus created by industry. a lot of the job openings happened in 2010 when there was a big shift, and it seemed like there were a lot more job openings relative to the unemployed, and that hasn't really changed much. job openings are relatively high given historical indicators, but that has been true for for four or five years and we haven't seen any chaos. wages -- yes people are talking about wage rates but in the context of which is being flat for five or six years. there is a lot of slack there. i don't see any immediate pressures. we talk a lot about month-to-month or these kinds of ephemeral indicators but the census data that came out last year is definitive that wage growth is pretty stale. i don't see anything that tends to say that this is a big thing

that is happening in such way that we couldn't catch it if it got out of control. joe: mike, it has been many years since the fed got 20. you have talked in the past about how it seems the fed has done next ordinary things -- qe, so on -- that there are other tools the fed should have employed. if we could go back in time, what should the fed have done all these years to make the recovery go faster? mike: i don't want to sound like a crank, but my pet theory and i think this is really important to discuss going forward, because no matter when they raise rates, we are not out of this atmosphere. we will be in a low rate interest for the next five to 10 years at least so it is important to formalize these tools. the fed should've gone ahead and set the 10-year, 30-year mortgage rate right out the door. this qe business was trying to adjust the rate without flatly saying what it should be the same way they flatly say what the short-term rate should

be. we have done that in past tense of monetary distress like the great depression and world war ii and to say that we will hold the 10-year rate at 2% or whatever it is -- there was a reason the fed didn't do it because they want to show how much control i have for the tools they have but i think it has complicated things about whether we will tighten based on predictions that it has put huge numbers in circulation that the public don't really get our asset swaps, not spending. more direct control would have been a smart move earlier. joe: the question is, of course, how about now? two central asset bubble inflation we may see in certain areas, like the high-yield market for example. what are some unconventional policy measures that perhaps the fed or congress can do to mitigate that without raising rates? well, i think that is a really good question, and something that we should be trying to put into the policy

debate that is not there right now. one of the things i wonder, if is worried about an asset bubble, maybe now is the time to play with margin requirements of it. this used to be a tool that was used very actively from 1945 to 1975. and then the fat just stop using it. -- fed just stopped using it. is worried about a house price bubble, but reserve requirements on a new mortgages and raised just the price of new mortgages and camped out the housing market. what you don't want to do -- this is a problem with the short-term interest rate -- it is a blunderbuss. it hits all parts of the economy, including the parts you don't want to hit, and most importantly in this era of globalization, it hits the exchange rate. i mentioned in my earlier comments how manufacturing is suffering from the exchange rate. i'm greatly apprehensive that if the fed raises interest rates, we will get further dollar appreciation, which could of

course hit our manufacturing and oil sector, but also could very easily spread east asia and china. china pegs to the dollar. if it starts to lose competitiveness, it will feel compelled to adjust its currency and lo and behold, that is how you get the makings of a global financial crisis. there are lots of other tools that we must encourage the fed and others to start talking about. change the direction of the debate. joe: mike, what about other tools apart from the fed you would like to see, something for congress to do with fiscal policy? mike: congress good direct the federal reserve to adopt a non-gdp target or make clear that they have specific targets in mind, targets that ideally balance inflation and employment or inflation and output, which nominal gdp target would do. i think the fed has tried very hard -- the fed has done things he knows he cannot fail out. you can always go out and buy

mortgage backed securities are treasuries. but the brief effort with the evansville, which was abandoned quickly -- it has not tried hard for the more conceptual shifts. if you are concerns about the financial sector, we know how to solve that come with higher requirements on derivatives, assets,sheets on mortgages, as tom brought up. for a lot of reasons people are nervous of tried to force them through. alix: we have outlined the weakness in the global economy with wages. what is actually good? this there's nothing you can point you to say, yes, the fed did that, it worked out? mike? europe we are to doing fantastic and that is worthwhile to emphasize. we could be in a position where the fed turned to tighten money. turnedd be sweden, which

to raise rates really because of the phantom menace of financial instability and had immediately retrench. we had a bit of a star-stop with qe2 starting and stopping and the economy weakening. but we haven't had anywhere near as bad as we could. alix: tom, what about you? tom: i agree with mike there. we have done much better than the rest of the world. if we have just refinanced the housing sector directly instead of of channeling it through wall street and allowing wall street to pick up all the commissions on the refinancing, people would have gotten a low rate without the volatility that has made picking the moment to refinance, taking the moment to buy a house, so difficult. the fed did not do well on that and if we have -- let's hope we don't have, but if we have another crisis like that, maybe next time we will go straight to it and peg the 10-year bond. by the way, there is still room to do that now. if you peg the short-term

interest rate, you are asking the market looks through expectations into what the 10-year rate will become rolling all those years forward. expectations -- why rely on market expectations, which are so noisy? instead, do it directly. there is room for that type of intervention in the bond market. joe: all right, thanks to tom -- tom: one more thing. we need more talk about the exchange rate, which we have not had in his program or more generally. a big problem for the u.s. economy, the exchange rate. joe: definitely a huge topic. we could go on for a long time. thanks to tom palley, afl-cio, and mike konczal from the roosevelt institute. alix: when we come back, the one thing you missed in today's fed decision. don't go away. ♪

alix: i'm alix steel. joe: and i'm joe weisenthal. what'd you miss? alix: what is the one thing you missed in the fed decision? i want to bring in matt from washington. during all the action, what did we miss? matt: we sort of put to bed this notion that there could be a dovish hike or hawkish path. a lot of people were expecting that if they did go they would try to signal that they would go slow and it would be a dovish outcome, whereas if they didn't go, they would set markets up for thinking they would be going in the next meeting or two. it is as simple as they did in hike and it ended up being dovish. yellen struggled in the desktop is to explain why do were talking about hiking in 2016 at this point.

it would suggest a lot less sort of need to move. the fact that you saw that and you didn't see a lot of conviction for yellen are -- or a good explanation for why they need to move in 2016, that took down the market probability of a move. around 45% today. that's a pretty big move. they weren't really able to convince markets that they will go this year, even though that is what they tried to say or convey. stillatthew, as you said, a 45% chance according to the market that it will move this year. from your perspective, is there anything that could happen in the next couple months that would change this fed to wanting to hike now? matthew: definitely. you could see the international situation clear up a lot, markets calm down. it just seems like getting all

of that to come together is a lower probability event than things flowing out more, because we've seen a bit of a calming down and markets over the last few weeks. alix: good stuff. in d.c.thew boesler today, thank you very much. few hours, the china statistics bureau will announce august property prices. let me tell you why we care. in july we had home prices rising in more cities than they fell. the first time in 16 months. maybe you will go by stuff like an appliance and that helps the economy. joe: another thing you don't want to miss -- i'm looking forward to the least anticipated greek election in years. there is an election happening , nobody's talking about it, but i am excited because regardless of who wins, people expect the government will form that is willing to do the bailouts and greece will be fine. greek yields, lowest in a long time.

and that is all for our special one-hour edition of "what'd you miss?" thanks for watching.

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