joining us, former federal reserve vice chair princeton economist alan blinder and the author of theter the music stops. great to have you with us. >> nice to be here. lou: let's start with cypress. this little place, million folks. they're creating quite a mess. $400 billion lost of global markets yesterday. we should blame -- >> multiple of the gdp. i actually think of like what is usually the case, the markets are taking this relatively, it. well have imagined real panic runs on banks. lou: and the shorts were trying to get us to imagine. >> they always do. that's how they make money. markets tend to go overboard. i don't think they did go overboard. i think their is a real danger. he knows what kind of a precedent this might be. lou: as a precedent i think it's worrisome that of all people the head of a european central bank would apparently sign off on a tax confiscation of small depositors money in cyprus or any other jurisdiction throughout the european union. that's the kind of precedent that i think is giving a lot of people concerned tonight. >> i would be denying unify sai

a former vice chair of the fed and noted economist alan blinder joins us here tonight to tal about thelities of a return to prosperity. and on wall street, the dow jones industrials powering through all those zero lorries to close higher. many investors still concerned about the eu bailout and the cyprus rejection of the eu mandated tax on the small depositors. news that the housing sector is stronger than expected helping to overcome some of the markets and today. the dow up about four points. the s&p fell to the sameumber, the nasdaq down almost nine. big board volume today picking up. gold moving higher, up 670, closing at 161130. crude oil dropping a dollar 58 to 9216 per barrel. the bond market and interest rates falling. the ten year treasury just under 2%. federal reserve policymakers beginning their 2-day meeting. my next guest said the fed will has been substantial, don't expect changes anytime soon. that should be music to the ears of most investors. joing us, former federal reserve vice chair princeton economist alan blinder and the author of the book after the music stops.

my guests alan blinder and david leonhardt. >> the most interesting part of the news conference was when bernanke was asked if he wanted to continue on in the job. his term expires in february, and although he refused to answer the question, he said he and president obama had spoken about it "a bit." i think it's interesting to think about the iea th a obama have talked about whether he wants a third term and perhaps how inclined obama is to give it to him. >> rose: a look at syria and chemical weapons. and also the bernanke conversation today about the economy and the role of the federal reserve when we continue. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: the syrian conflict reached new levels this week. the assad regime and the syrian opposition groups accused of each other of using chemical weapons. the allegations were made only hours before president obama's departure to israel yesterday. the white house has yet to verify the claims but lawmakers are increasingly calling for action. here's what presidentbama said eai

david: a lot of people like alan blinder an wayne angell are against the policy because they think ithibits or at least suspends for the moment the ability of banks to lend money out because they get paid by the fed. >> it will tamp down lending. that is what you want when things get too hot. not now. we don't have inflation now. in the future when things get too hot, when the economy is roaring you need a tool like ttat. liz: randy warren. david: thank you. one of his picks is boeing. we have breaking news on boeing airline. the faa approved the 787 certification plan. what does that mean? it means boeing is able to test the 787. you see the stock moving slightly higher in the ask. at least. they're able to test the 787 battery fixes. he will not allow 77s to back to service until he is satisfied about the planes. randy, while we still have you, is this -- >> you have tin years of r&d coming to fruition. they're able to sell these things for revenue and profit. ten years of development finally coming to fruition. david: are you buying more boeing tomorrow? >> definitely. david: randy

cash, which is what we're doing now, that is not only accepted by you, a republican, accepted by alan blindermocrat, with the clinton administration, professor from princeton university. there is wide view from economists from both the left and the right this is stupid, the fed policy of paying banks to hoard money. but it leads to a bigger question, wayne, which is, what good is all this money printing, another trillion dollars of money printing this year if they go through all the purchases if banks are not lending it out? what good is the money sitting there in the banks? >> well not much. it doesn't do much good if you don't get the commercial bank, multiplier effect of having them make loans. and that's where it really is and if the fed wants to continue in this, in this vain, it is going to end up with a very long policy period in which it doesn't look all that smart. david: and a portfolio by the way of $4 trillion worth of assets. that is pumping out, printing essentially $4 trillion in their safe they will have $4 trillion of assets that may be diminishing in wealth. so the fed could

. >> rose: well, alan blinder says some of that, too. >> that's right. alan put out this thing which he said in the atlantic how to worry about the deficit. one, don't. two, wait a few years. three, worry about health care costs. >> i'm totally on board with that. but what alan also said was that the situation was going to be so bad that we were going to have to address it and not the next year, not the next two years or three years but he said the situation was going to be so bad that democrats were wrong, they weren't going to be able to tax their way out of it, that this was going to be a huge crisis certainly ten years out. >> it's democrats we ear talking about. certainly not the president. the president has always been offering a mixture of entitlement cuts and revenue increases. so more revenue -- >> rose: what entitlement cuts has s the president recommending? >> well, at the moment -- first of all you have to bear in mind that there is is substantial cuts in outyear medicare expenditures already. >> rose: because of health care reform. >> right.

. >> next, alan blinder says the 2008 financial crisis was the result of the financial system becoming too complex and too unregulated.

. >> rose: joining me is alan blinder of princeton university, the author of "after the music stops, the financial crisis, the response and the work ahead." and david leonhardt, author of "here's the deal: how washington can solve the deficit and spur growth." i am pleased to have them both on the program. what's the headline coming out of bernanke's press conference? >> i think steady as it goes is the main headline. the fed is going to continue to buy these bonds it has been buying at about the same pace. it's going to continue doing it until sees unemployment fall to about 6.5%. i don't think there are any changed today. i think the most interesting part of the news conference was when bernanke wanted to stay on in the job. although he refused to answer the question he said he and president obama had spokeeb about it "a bit." i think it's interesting to think about the idea he and obama have talked about whether he wants a third term and how inclined obama is to give it to him. >> rose: i would think if obama is talking to him about it it suggests will obama would like for him to