caioning sponsored by wpbt >> as an experon the causes of the eat depression, i'm sure ben ver imagined that he would be part of a team respsible for preventing anoer. but because of h background, s temperament, his courage, and his crtivity, that's exactly what he hahelped to achieve, and tt is why i am appointing him to another term as chairman of thfederal reserve. >> susieit will be take two for ben bernanke. we talk about his reapintment anwhat's next for the central bank. our gues, former fed governor urence meyer and fed watcher david jones. >> paul: what's anothe2- trillion? the white hoe revises its ten-

year deficit forecast to %9 trillion. but servicing all that debt ll be a costly prosition. >> susie: a new repo shows that conmers are feeling more confident about theconomy. and that could mean more on wallets. but analts say american tailers are still adjusting a "new normal". >> paul:'m paul kangas. >> susie: and i'm sue gharib. this is "nightlyusiness report" r tuesday, august 25. "nightly business rert" "night business report" is made possible by: this program was made ssible by conibutions to your pbs station from viewers le you. thank u.

>> susie: goodvening, everyone president obamgave ben bernanke vote of confidence today, ninating him to a second term as cirman of the fedel reserve. speang from martha's vineyard, where he is vacationg, the president praid bernanke for hi"calm and wisdom" and "bold action" in rescuinthe u.s. economy. bernke's current term at the fed ends in january. his nonation still needs to be confirmed by congress. but today, the fed chairn promised to coinue work to reste stability in the economy and the markets. >> we ve been bold or deliberates circumstances demanded but our objecti remains constant, restore a more sble financial and economic environment in whh opportunity can again flouri and in which americanshard work and cativity can receive their proper rewards >> susie: joininus now with moren bernanke, laurence

meye former fed governor and now vice chaman, macroeconomic advisers and david jones, c.o. of d.m.j. advirs and author of "unlocking theecrets of the fe. test. good evening. >>arry, let me begin with you. you support the bnanke renomination. tell us why. >> yes, unquestionably. the fit issue you have to decide on, whether y thi he deserv to be reappointed. th's a question of how good a job 's done as chairman. i believe he's done an exceptional job dung extraordary tim. he's been aggressive and creave. and put in place a set of pocies that pulled the economy back from the edgef an abyss, an it set the foundation for at least positive groh, although subdued growth in the quarts ahead. >> susie: david, do youagree wi larry? did president obama dohe right thing byenominating ben bernanke >> without question.

the renomination bernankeas a key decision by the president. well-deserved as larry sugsts. we had a difficult test situation for a new fed chairman, maiy witacademic experience. e good news was he had studied the greatepression as an academics the president alluded to i don't think hever thought he'd be in a posion where he was ying to keep the economy out of another great depression, but he's really done a goo job. he has been bold. he's ud imagination. he used both convention fed tools in terms of rate cuts,ut he's moved o into an area we never seen before unconvenonal policies, buying securities in order to push wn mortgage rates and low longer-term borrowing cost for households and business. really been a remarkae record. >> susie: let ask both this, because ev his

suorters criticize bernanke, that he was slo to identify the telltale signs of the csis, identiing the first fla-up. th when he did rct, he overreact with picies that they say stretched th resources of the federal reserve now thbig concn is will he ti the fed's exittrategy operly. will he thdraw money from the economy on the right ting. l.a.you first. yo reaction. >> well, that'half right. it is true th the chairman didn't recognize the sig of -- whether it was the hsing bubble or the financial meltdown. personally can't critize him for that, becae i was in the same positn as heid, and i didn't see tt coming. in tms of how he's reacted, i thinit's absolutely wrong to saythat he oveeacted. heeacted appropriately, aggressively as s necessary. now, whether is overstretched the limitsere, you know, i thinthat he certainly went to

edge with his use of the fed powers, but i thk stayed thin it. inerms of whethe or not -- susie: the exit strategy. >> -- whether he can makexit at the appropriate time, i think that's te, but i think it' the wrong questi. everybody's focuseon exit. we look back on this situation two years from n, the qutione'll reay be aski, not whether the fed exited at the apprriate time, buperhaps why the fed wasn't more stim lative toda in goi forward. >>usie: david, whado you think? >> i think the key decision to bernanke looki ahead to his second term is this exi policy. once again, in in terms o his study of the great depssion, the fe did very little as the economy slid into e great depression, and then the fed

tightened too soon in 1937 th an exit policy, and that lengthened the eat depression. thank goodss bernanke has been a student ofhis. i thinhis big decision wl be this exit policy. i think he will hane it well, because 's moved his poly to a highly accommodative ste. he's rea to unwind it a little bi he's talked a lile bit already about unwinding his purchase of treasury securities etty much on schule, by october. he had earlier said september and maybe th will be the fit step. i doot see a rate hike until we move into next year, not unl we see the unemployment ratetabilize or start to come down. >> susie: let me ve into another direction here. with this renomition from presidt obama, do you think that this ves ben bernae w clout th he may be able to win more regulatory powers for the federal reserve as this -- as congss considers regulatory reform? larry, what do you think? >> well, i tnk that will be

chalnging. it'shallenging for the treary and also for theed. there's a lot of hostily in congress. a t of reluctance to give the fed w wers. and very frankly, congress just didn't he seem to understand the situation ry well, because the treasury's proposain fact doesn't ge the fed vast regulatory pows since it's already the superviso of aost alsystemically important financial institutions. >> susie: real quickly, we just hav aew seconds left, vid. i want to asyou about larry summers. the rumor mill was that he w very interested in being the fed chrman. what happe to him? does he stay as t chief ecomic advisor to president obama or does he move ? >> i think he will stay as the headf the nationa econic council. thright-hand man for the president in terms of economic licy. i think height at one point have wand that fed chairman's job, but i think bernke did a goodnough job in handling the

credit crisis and championip to deserve to be -- and- deserved to be nominated. >> susie: we'll leav it there. thk you so much for coming on the progra >> susie: my guesttonight, laurenceeyer, former fed vernor, and now vice chairma macroeconomic adsers and david jos, c.e.o. of d.m.j. advisors. >>aul: on wall street, news of the fed chairman'seappointment combed with positive economic ta to send stocks sharply higher at the open, the dow jumping 11points and the naaq rising 21 points in the first hour of tradin a profit takinpullback was cushioned byeports of rising home prices and stnger than expect august consumer ntiment. more on thosreports in a mome. so by noon the dow was sti up 80 points and nasdaq up 15. the market faded slowly rough the afteron but still ended with modest gains.

>> susie: news of ben rnanke's appointment could not drown out the other big nouncement from washiton: deficits are rising. the white house buet office now projects $trillion in red ink ov the next decade: two trillion more thanxpected just fouronths ago. and as dren gersh reports, the nation has to pay intere on all that add debt.

>> reporr: basically the federal governnt finances its spending on everything fro agriculture to nasa with something very muclike a short-term adjustable ra mortgage. when interest ras are low, as they are now, that good news says bget analyst stan llender. >> we got lucky thisear is what it cos down to. the government did the equivale of winning the lotty it got lower interest rates, but we can't cot on that every yr. >> reporter: today figures from theongressional budget office show just what happs as interest rat return to more rmal levels. intest on the national debt over the next n years is expeed to more than triple sing from $177 billion in 20 to more than700 billion in 20. add up all thenterest payments er the next ten years and yo get $4.75 trilli. but at's not the whole story. that just looks at crent policies. if, as sms likely, congress tends key tax cuts, interest

costs willo up another $566 billion for a total of $5.3 trillion. and dget reform advocates like maya macguineas say e ever- rising deficitrojections will get a close look by e nation's credits. >> you can'torrow this much ney without at some point yo creditors sayingthis looks a litt risky to me. i am goingo charge you a bit more of a premium and when tt haens, when the interest costs go up, because intest rates go upthey start to squeeze out all the other parts the budget. you then have toorrow more st to pay for your interest and at's how you get stuck really in a vicious debtycle. >> reporte although low now, interest costs arerojected to be one of the fastest growin parts of the fedal budget. >> it also the most unntrollable. that is, you can cut social security, if you wt to and have theolitical will, but you can't cut interest on th national debt. the money has alreadbeen borrowed. reporter: think of debt service as a leading iicator. the cost of borrowing rises economic and polical pain follow darren gersh, "nigly business repo", washington.

paul: there are fresh signs of a rebound in thhousing market. the standard and poor'case shiller homerice index rose 1% from may to june. it's second-straight month t month increase. but those numbers are ill down 15% on aear over year basis. e federal housing finance agency also releasedata today supporng a recovery. its index shows pricesn homes with mortgages guanteed by fannie mae and freddie m rose one half a pcentage point from may to june. bothroups say price gains are being driven by first-ti buyersnd bargain hunters snapping up foreosures. >> susie: as paul mentned, a new reportrom the conference board today shows that consurs looking ead six months are much more confidenabout their own nancial fortunes. that should be good newsor retailers, because peopl concerned about their financ tend not spend. scott gurvey explas.an >> reporter: whethe economy hit the ids the retail sector fell o a cliff from which it has yet to recover.

pele without a job or afraid of losing one just d't spend. maridriscoll of standard and or's says retailers have scrambled to adjust. >>n the last year we've watched retailerslow down their ste expansion, reduce eir inventory investment, sk theimerchandise assortment. whe they still have higher priced items available forheir shoppers, they've ewed their assortment to wer price points. >> rorter: wall street anticipating lower earnings r some and actualosses for otherspunished the sector's stocks. but mberly greenberger of citi notes a recent modesrecovery in sharerices matching more encouraging news about the economy. >> we dohink there has been a fundamental change in thway consumers spd their money. however, we we through a very vere shock period really, october, november, decber of st year where we had probabl overrrected to the downside relative to wh we consider to a new normal of spending.

>> reporter: but jt what will thatew normal of spending be? todas confiden numbers indicatet will be above rrent levels. but below its foer peak. >> we don't ally anticipate that they'll go ck to spending levels that we saw itwo thsand and seven because so much of that was driven available credit, veryasy credit terms, people ting equity of the valuof their real estate. it was a lot of aspiratial living, livingeyond one's mean >> rorter: that new normal should mean good news fothe big x stores where value is the proposition. buthe experts say it also will be good for speciay retailers that can really differtiate their line >> the retailers who wthink are going to win will behose reilers that are wowing the customer. putting fashion inheir stores that ireally covetable, must have fashion that consers just can't rest. so that long term is what we ink is the winning strategy. >> reporter: greenberger ss most american won already have a full closet of cloes and

that they ne to be inspired fore parting with their mone scott rvey, "nightly business report", new york. >> pau now, let's take a look at some stocks in the ws tonight.

>> paul:oining us for more on the markets and the upwardrend in o prices, craig callahan, founder and presidt of icon advisers andhe icon funds. craig, welcomeack to nbr. >> thearkets welcomed today's bernan bernank, but you say pols shouldt matter to investors. what dyou think? >> people fosed onwashington, woied about things, debates and uncertainty, and ey're missing the stock maet. in terms othe fed chrman, he willnherited quite a crisis a year ago, d i thought he handled it very well. so i think thmarket likes stability and we're fine with this reappointment.

>> paul: politic is fine with investing? >> yes. people are debating issues that might haveonsequences three, four yea from now. th market dsn't look out that far. >> paul: s months or so. >>efinitely. >> pau what are you seeing in the markets right now? >> broad markes up 53% fr itlow in march. we think it's a seible rally. a ry typical econoc recovery anticipation rally. >> paul: but overdone? >> no when it started we saw stks as 45%elow fair value. we still see the as 10% below ir value. we think this can ntinue. >> pl: other bullish factors? >> corrate bond yields are dropping. that's not talked about ry mu, but one of the best rallies in corporate bonds we'll ever see is underway now very supportive forigher stock ices. >> paul: b won't interest rates be risingif this economy doesn't indeed recover? >>e don't fear that. in terms of treasury yields, can see them inching sghtly higher, bu no real pressur to skyrocket. and again, corpate bond yields coming down.

it a favorable situation. >> paul: what are red ags in your mind for thisarket? >>it would take som unpredictable shock-pe event. of crse those are posble, as we saw in 2008,ut i think they're bend us. if things would stay normal, it's higher om here. >> paul:his is a true bull market in your eimation? >> y, it has the cssic trts. even the learship, led by materials, iustrials, consumer scretionary cyclicals. that's as it should be. >> paul: dyou have a mark for the dow to reachn a certn period of time? >> based on val, we'd see the mark at least 10% hier over the next year, but i think value can move even higher make that target more loftier. >> paul: okay. oil prices at $75 a brel today before pulling back a bit. do you see the runup continuing? >> wl,hort-term it's ry difficult to predict t randomness of the oil mart, but overhe long-term with an onomic expansion it wld be proper for moderatel not the ike a few years ago, but morately higher over theext

couple years. paul: in a capsu, what are you telling investors rit now? >> you look back at the crash of 1987, and it took about two years to recover, tw steps forward, one back, tw forward, one back. wasn't a fun rally, but d recover. 're in for the same now. >> paul:the bull still has li? >> we think it does. >> paul: greg, weeun out ofime. thank u for sharing your views with us. >> thank you very much. >> paul: my guest craig cal callahan. >> paul: my guest craicallahan of icon visers and the icon funds. >> susietomorrow, from oreos to ritz crackers to mac cheese, stet critique guest patrick o're tells us why he's hungry for shares of kraft foods. >> sie: toyota plans to cut its global productn capacity by 10% or e million vehicles according to japanese wspaper "the niki." the wod's biggest automaker wants to maximize operationst its under-usedlants. the deease in production will come as early as this scal year. toyota also hopes toeturn to an operating pfit in fiscal 20. >> paul: youe soon going to y more for a six-pack.

anheuser-busch ibev said today itlans to raise beer prices this fall. the coany's main rival miller- cooris also hiking prices. neither firm would speci by how much. both beer giants have be able to boostrofits recently by raising prices to offseteaker sales grow. some anasts think higher pricesay prompt some beer consumers to cut back.

>>usie: here's a look at >> susie: tonight's coentator says wheit comes to the web economy. ree" always costs something. she's barbara kahn dean of the univsity of miami scol of business adnistration. >> cis anderson, author of the new bookfree: the future of a radical price", and otrs argue that in day's digital age, firms must learn how to be profitable while offing products andervices for free. skype, facook and many iphone applications are certaly exampl of how consumers are demaing services for which they pay nothing, hee free. but assifying these models as free misses critical point and understanding this will illunate where the profit potential is. our economic sysm is based on exchange theory, where tre are buyers and sellers willing t make an exchange andeon's notion of free

suggests that only onearty is puing something into the exchange and tt's not a market t a closer look at these digil examples reveals that they are not free, thejust don't cost mey... yet. consumers arputting something into the exchange, their tim loyalty, or trus free televion is not free; it costs your time and attentn. that's valuablto advertisers. facebook users invt their network ofriends, which ties them to system and that is valuable. these so-called free service are proliferatin if consumers don'tnitially pay ney for such services, they must put something valuablinto the exchange if profits are be realized. creative businessewill design freemium productand services thatonsumers pay for with non- monetary resources, sources that can ultimaty be used to garn profits. bottom lin in business there is no su thing as a free lunch; jussometimes it doesn't cost any money. i'm barbara kahn. >> susie: that's "nightl

business report"or tuesday, augu 25. i'm susie ghib goodnight everne. and good nig to you paul. >>aul: goodnight susie. i'm paul kangas wishing all of you the besof good buys. "nightly busess report" is made possible by: this program was made possib by contributns to your pbs station from viewers likyou. thank yo captioning sponsored bwpbt captioned media access group at wgbh access.wgbh.org