so they get the cash they can bomb assets to the federal reserve the federal reserve now acts not just as a reserve or even a private company it's a hedge fund portfolio manager now right so basically the loophole in the constitution about congress being able to coin money so basically the treasury technically coins the money but essentially is the federal reserve that's behind the currency you're actually being. issued in a sense would basically be for the reserve dictates ok i would expand the supply of money in the economy correct that's right that expander that money supply extremely . exponentially exponentially aggressively since the financial crisis in order to be able to liquify or to keep our private banks solvent so it's really been one of the biggest subsidy programs for our private banking system since the inception of the country and what the federal reserve does by conjuring this money and yes getting around sort of old school method of physical coinage or physical money is that we're not trying to gauge what digitizer they can just basically do this with a flip

would charge of the federal reserve is. it is not only a private bank ultimately it's not really. federally controlled or even monitored because the feds never seriously been audited correct that's correct the fed itself is kind of like a corporation it has a board of governors but that's really equivalent to a board of directors and its members are the private banks that it is supposed to regulate and the way that membership has worked since the inception of the fed from the federal reserve act of one thousand nine hundred thirteen through today is that these private banks have shares in the federal reserve in the bigger they are the more shares they have used to be reports that came out exactly as to what bank has how many shares and what their percentage of ownership is but those stopped in one thousand nine hundred one so we just have to guess that we know that j.p. morgan chase has a larger share for example than some small local bank wherever and that's how the participation works in terms of how that relates to the go

yes the federal reserve is unusually clear on the past looking forward to overall the federal reserve expected for interest rate increases in twenty eighteen so we've seen two already meaning another two are to come and then maybe also a couple of more rate increases and twenty nine thousand so the next rate hike probably in fall maybe another one shortly before christmas by the way the federal reserve said that the unemployment rate is going to drop further probably to the lowest level in almost fifty years or i know wall street for us yes quarter thank you. well the german or to make a fog fog it has agreed to pay a one billion euro fine as a direct consequence all diesel gate the company accepted an order by german prosecutors which saves them trying to fight it in court now v.w. has already paid a total of over twenty five billion euros in the diesel gate scandal fines and costs mainly going to u.s. authorities. v.w. is reeling after being slapped with another billion euros in penalties on top of those that the company must pay in the u.s. as a result of the emissions cheating sca

for a long time now, we have had accommodative federal reserve policy. mary: it is interesting and as we have seen the fed move toward a goodeld, we have seen amount of outflows from asset class. spreads have been fairly stable but certainly as rates rise, some of the more levered markets could see headwinds in terms of the cost index. jonathan: i saw a piece from a professor on twitter. he pointed out the tension in the market. the federal reserve is talking about moving through neutral. the market does not i it. it thinks the federal reserve is nervous about inverting the yield curve. they will have to invert the curve to go to neutral. can the federal reserve get through neutral without inverting the curve? bob: it is possible. one of the important factors that will influence that outcome is out of the fed's control. treasuries insurance -- treasury issuance. far, they have not extended the duration of the weighted average maturity and they are probably likely to do so in the near term. a shift could easily help the fed avoid an inverted curve even if

a jobs report leaving the federal reserve on track to deliver more hikes this year. and a tough week for a former bond king. the biggest drop in four years. we begin with our bloomberg jobs report. >> the numbers are strong. >> it is good news on all fronts. >> i think the wage front is very important. >> even though the wages are just above 2.5%, inflation is bouncing around. real wage growth is pretty mute. people are dipping into their savings to continue to spend, and that is worrisome. >> we are still not seeing the real broad-based acceleration in wage road that we would like to see. >> it is pretty much a scenario where the fed hawks think they can move forward once or twice. >> the numbers are strong now. i think as you get into next year, is the fed going to go three to four times this year in total, they are going to go three to four times. >> joining me around the table is the chief investment strategist at pgm fixed income and the head of u.s. multi sector fixed income strategy at black rock. great to have you with me. it is very hard to find any weakness

there was a gap each week but i would do in the federal reserve exec -- expected. but what you are supposed to do is note the gaps in the report to write down this is not working for this is how long it takes to fix it. >> your book is called noncompliant what were they doing that was noncompliant? >> it wasn't just goldman sachs that came out of compliance but the federal reserve bank of new york employees as well. it is easier for me to say what they were complying than not. because the gap was so big. there are very few things they were doing right. >>host: can you give an example? >> one of the stories i talked about is when i and sitting down with an official who passed on knowledge of the anti- laundering money program to put it very simply the rules they are supposed to follow a customer that tries to use the bank to launder money. so what was shocking to me as i was sitting there was how this particular employee was telling me at the same time they're not just doing them in the united states but in the offices around the world at the same time trying to con

mary, this concept of the federal reserve gradually moving through neutral.ing through neutral, how key is it the federal reserve to get to a place where it can move through neutral? and what would that mean for risk assets in the u.s., at a time where we've had very accommodative federal reserve policy? mary: it is certainly interesting. as we have seen the fed move toward high-yield, we have seen so far this year, a good amount of outflows from the asset class. that being said, spreads have been fairly stable, but certainly as rates rise, some of the more levered issue is in our markets could see headwinds in terms of the cost of debt. pointed out the tension in the -- jonathan: i saw a piece from a professor on twitter. he pointed out the tension in the market. the federal reserve is talking about moving through neutral. the market does not really buy it. the markets is the federal reserve as very nervous about inverting the yield curve, and believes that if the fed ultimately was to go neutral, they will have to invert the curve to do it. can the federal

last week in portugal that the federal reserve intends to raise interest rates four more times before all is said and done to get from two percent to three percent the implication for the yield curve is that it would indeed invert based on federal reserve actions to come that's very interesting thank you for explaining it are you personally concerned right now or are you think it's going to be ok. well look today we saw some consumer confidence numbers come out and it's very distressing to me when households report that their expectations for income growth are falling and yet that's what we were starting to see come out of the household sector we know that in certain pockets of the labor market that you can name your price as an employee and that that is having a detrimental effect on employers and their profits and my concern is again if hell soldier starting to see that there are fewer job opportunities out there and or that they have less in terms of power to ask for that price raise then we'll start to see a ratcheting back and consumption and that means that the communication the

the federal reserve is talking about moving through neutral. the market does not buy it because they see the federal reserve never said about inverting the yield curve. can you reconcile those two things? can the federal reserve get away with getting through neutral without inverting the yield curve? >> it's possible. one of the important factors that will influence the outcome is out of the fed's control, treasury issuance. manages the treasury the growing deficit financing needs they have over the next several years? so far they have not extended the duration of the weighted average maturity and are unlikely to do so in the near term. a shift in technicals could help the fed avoid an inverted curve, even if moving above their version, assumption of neutral. jonathan: as we close out this segment, every single friday, if you went on vacation the last couple of months and only checked the market on friday, you would think nothing happened over the past week with the 2-year, and the 10-year either. this treasury curve seems to be stabilizing. i

and i think they'll follow a similar playbook of the federal reserve. end quantitative easing, as steve liesman expects in december, then i think they start gradually tightening sometime around june of 2019 >> i want you to answer the question brian gave to me. how much is european qe, low european rates worth for the united states? how much is it keeping down our rates here >> i think it's having a dramatic impact. when you look at german bunds hovering close to 50 basis points, i don't think it takes a genius to figure out that ten-year yield would be a lot higher that's holding interest rates much lower the good news is that inflation, even though it's been creeping up -- steve, you saw the producer price index yesterday, they are hotter. the federal reserve has to start raising interest rates more aggressively you yourself pointed out they revised upward the gdp numbers, revised downward unemployment rate numbers so with all that, they're basically telling you the economy is getting stronger. when that happens, what do you have to do if you're a cen

do you think the federal reserve gets it right or from an investing standpoint, does the federal reservet wrong and need to do other research on your own? >> well, i think investors should surely be doing research on their own. their own due diligence, there's a reason financials have been down 13 out of the last 14 trading days, some of it has to do with the fed's credit, they've been watching closely, that's credit card losses of the $558 billion of losses banks would sustain under a worst-case scenario, by the stress tests. 100 billion from credit card losses. so if you look at that relationship, they line up decently. i will line up to the goldman sachs matter for a minute and morgan stanley. i think they're really going to take issue with this, and as john said, there was no surprise with the deutsche bank, but i was a little surprised we didn't hear conditionality attached to wells fargo. as deutsche bank had issues on the institutional side, wells fargo had certainly had well-publicized issues on the retail side and the fed has slapped their wrist. so i'm surprised that the fed ga

insider. >>> the countdown to the federal reserve meeting is on.for a more hawkish fed ahead. >>> and pizza and potholes what one restaurant chain is doing to fix america's crumbling infrastructure the details as "worldwide exchange" rolls on ♪ >>> all right. welcome back thank you for being with us on cnbc i'm brian sullivan so glad you could join us. let's check on what's leading your money news. the international energy agency putting out its monthly oi outlook. they expect the spike in prices to ease a bit. the iea sticking with its current demand forecast for next year but cautioned things like a trade war or economic slowdown could present downside risk. >>> shares of zte falling. the shares resuming trading there after zted a deal with the u.s. to pay a $1 billion fine and replace its board after it violated sanctions. >>> and guess co-founder paul marciano resigning as executive chairman of the clothing firm following an internal vision what showed poor judgment in situation involving models and photographers. guests and marciano resolving

in fact, here's what the chair of the federal reserve , here's what the chair of the federal reserve,reserve, dave powell, had to say in a press conference following the release of that statement. concerns about changes in trade policy are rising, it's fair to say. you are beginning to hear reports of companies holding off on making investments and hiring people. right now, we don't see that in the numbers at all. the economy is very strong. the labour market is very strong. the labour market is very strong. growth is strong. we really don't see it in the numbers. something else that's not in the numbers? the potential disruption that a faster rate interest increase could have on emerging economies around the world. already, india's central bank governor has warned the fed that by decreasing the number of dollars in circulation around the world, it's harming economies like india's. but with a booming economy, a favourable fiscal environment and the prospect of finally, finally ending an era of accommodative monetary policy on the horizon, it's unlikely that america's central bankers,

let's go to jean's father, who is at thea at the federal reserve.as expected, unanimous vote, a 25 basis point increase, and 2% the new target range. in a big piece of news, four rate increases in 2018, up from the three projected. one in 2020, so essentially, we are pulling forward into 2018. at two point 9%, and it means that that is seen policy moving into what could the restricted territory. next year, in 2019, a year earlier than expected. i'm sure jay powell will be asked about that at 2:30.

the federal reserve is responsible to ensure we have money supply.the economy gets too hot, they raise the right. if it gets cold, they make money cheaper. that is what happened in 2008. they lent money to banks at a disk in and we are trying to get back toward normalization.>> you got extra money for borrowing money and it was a great time.>> now the economy is going along and unemployment is down and we are paying the piper.>> the federal reserve chief removed some of the barriers. the barriers since 2008 have been the interest rate the federal reserve have raised rates to control inflation. now they are ready to rock 'n roll. we are expecting a raise in september and quite probably a raise in december. we did not think it was going to happen.>> we were talking about it.>> not four in one year.>> the federal reserve's -- reserve thinks we can accommodate that. they think it will trend down by the end of the year. it means it is almost full employment. they see the, besides the job rate, they see the indicators. the earnings report and job reports t

how does the federal reserve respond? jay: this is coming front and center right now.t least for late last year and the beginning of this year, we were in a globally synchronized upswing of growth. it helped miss the point of the fed tightening but now the growth has decelerated in the euro area and the japan, the yen, and the u.s. is going alone well above trend. it is coming out to the forefront. with labor markets running well above potential and inflation rising, it is hard for the fed to stop right now. jonathan: the fed faced severa calls this week from indonesia and india to slowdown the pace of the balance sheet. is that something you think the fed actually needs to consider? kathy: they need to consider it. i don't think they will do it anytime soon. so they seem to be on a fairly preset course to unwind this balance sheet. as long as domestic indicators are strong enough, i do not think that will change policy. they will have to see financial conditions really tighten or a really significant decline in global growth that would affect the u.s. before they woul

north korea summit and focused on the federal reserve's policy meeting now the fed is widely expected to raise interest rates for the second time this year on wednesday best as. to whether it will raise rates three or four times. says goes straight c.n. score to you standing by for us in new york games what are you hearing there on the trading floor about that meeting. well it's certainly pretty much a done deal that we will see another interest rate term increase and for certain the big question is will we see further increases this year and other one maybe two or maybe none and the problem is even the federal reserve through it does not really know at this point a lot depends on for example how the trade disputes will play out higher tariffs usually mean higher prices so that could drive from inflation i might cause the federal reserve to come up with more. increases we already got a new reading on consumer prices here on tuesday and we saw the biggest yearly increase in more than six years also if you look at the unemployment rate in the u.s. we're just shy of the lowest unemployme

as the us economy speeds ahead, the us federal reserve has been stepping in.fuel for the economy and they have been providing that fuel to get out of the recession and get the economy going. now the economy is doing fine on its own and known only is it time to ta ke on its own and known only is it time to take the fuel away provided for a period of time, there are concerns that there is evidence of the economy overheating. donald trump says his policies, including a massive tax over all, a putting america into prosperity but that only works if everything under the bonnet is running smoothly. as soon as we get news from the fed is we will update you. now let's brief you some other business stories. tesla said it plans to cut 9% of its workforce, that's 3,000 jobs, as part of a restructuring as it tries cut costs and boost profitability. the layoffs at elon musk‘s electric car company come as it tries to increase production of its model 3 sedan and turn a quarterly profit this year. wpp is reviewing the way it implements its codes of conduct following allegation

as you can see from the federal reserve, and this was an any can see the snapshot. point 5%, the s&p 500 lowered by .4%. have -- we did have tech stocks outperforming earlier on. some of the weakness that we saw. seeg headlines, and lightfoot we saw yesterday at&t comcast proposal for 20th century fox, and all ca proposal for the 21st century funds. what we got through at&t yesterday, the proposal at $35 per share. obviously, battle for 21st century is active between disney. that we were expected between obviously, battle for 21st comcast, just for here, eastern time. marginally higher on two-year yields moving up 2.75%. 2.97%, theyd up were about 3% at one point. with theing markets yout end of the em curves, can see they're moving significantly higher on the day. at 2%, and the 0year intraday e how will not all that hawkish than kiss press conference emphasizing multiple timest he is not ready to declare victory on inflation. language like that tempering moves. 2.97%. yield at you can see the rally we saw in the u.s. dollar which tells the story as far as the pres

the federal reserve to raise interest rates this afternoon.well says in the possibility of more news conferences in interest rate hikes. it is pretty much expected a quarter-point race today. features into a gain of 30 points on the dow jones industrial average. the nasdaq up 17 points. take a look at the close yesterday. the dow was down one point by point. the 43-point move upwards. in europe gcross the board take a look at the indices. st 100 up a quarter of a percent in the dax index right now. markets mostly lower at the close. japan was higher up a third of a percent. hong kong down one and

he is life at the federal reserve. ed? reporter: the federal reserve says they will raise interest rates quarter of a percentage point between 1.75 to 2%. also in further signaling of a tightening of the money supply the federal reserve will raise interest rates paid on excess reserves and balances to 1.95%. the fed raises primary credit rate to 2.5%. that is a stick up of a quarter of a percent. they believe inflation will be near target level with a strong labor market conditions. federal data shows that household spending is driving some of this, with strong labor market conditions. the fed data sws household spending has picked up. investment is growing strongly. the fed says there are risks it economic outlooks but it is roughly balanced going forward. so there is no language in this at all about a possible trade war or anything related to trade. just that they'reatching international developments. the fed also removed very significantly the information about forward guidance going forward. the federal reserve removin

but it is the federal reserve was that job to prosperity.e everything under the bonnet is running smoothly. as we have been reporting, it was the handshake seen around the world. us president and the north korean leader kimjong on meeting in singapore and the two men appeared to have gotten along the fine. according to mr trump, sanctions against north korea will be remaining in place. desperate state of its economy is what many believed brought the north korean leader back to the negotiating table. following the summits, will be seen not as south korea starting to do business together again? i put that question to chatto carol. the un ‘s actions that un sanctions make that pretty much impossible. but there are areas of inter— korean corporation that we could envisage, tourism for one example is not sanctioned, chinese, western tourists are allowed in and that could be significant because right now the north koreans are building a huge luxury tourist resort on their east coast, just a stone ‘s throw away from south korea and therefore that m

meanwhile, the federal reserve raising interest rates as expected yesterday.increases later this year, another sign that the economy continues to strengthen. checking markets this morning, take a look, futures indicating a lower opening for the broader averages today, dow industrials down just a fraction, although we're going back and forth between positive and negative territory. the dow industrials unchanged from where it closed yesterday. it's a tight movement today, not major moves at all. declines across the board yesterday, meanwhile, was pretty volatile at the close. major indices closed near the lows of the day following the federal reserve decision to raise interest rates. in europe investors are waiting on a similar story, the european central bank will have the decision shortly. they're expected to signal to the markets that it is ending soon its bond buying program. that would be a tightening similar. there is uncertainty about the slowing growth in the eurozone. markets are lower. fq100 down a half a percent, the cac is down a quarter of a percent

jonathan: are you expecting changes for the federal reserve outside of the rate hike?athy: i think we might see a little more consolidation. we've had dispersion that has been wide varied they may consolidate. i want to see the longer term target and has it changed? it is hovering under 3%, and if it stays there, that means not looks -- not much change in the tenure. jonathan: we'll leave it there and wrap things up. rapidfire around. , apparently it can't be long growth. which one is it andy? andy: dollar. kathy: dollar. jay: dollar. jonathan: complainers of emerging markets, one is india and brazil. you buy andy a or do you buy brazil? the two complainers of emerging markets. andy? andrew: brazil. kathy: brazil. jay: no difference between the two. jonathan: final question. treasury as a shock exorbitant and what happened earlier in the year. -- shock absorber, and what happened earlier in the year. a year from now? andrew: under percent. kathy yes. jay: absolutely. city --: for new york from new york city, i was you next friday ahead of a massive week ahead. i am loo

also in further signaling of a tightening of the money supply the federal reserve will raise interestss reserves and balances to 1.95%. the fed raises primary credit rate to 2.5%. that is a stick up of a quarter of a percent. they believe inflation will be near target level with a strong labor market conditions. federal data shows that household spending is driving some of this, with strong labor market conditions. the fed data sws household spending has picked up. investment is growing strongly.

that's what the federal reserve did today. raising interest rates.s was the notion that maybe they're going to hike more than we thought. susan lee with more. what happened? >> interest ratesre going up for the seventh time in three years. a second time this year. wall street, and this is the reason why we saw stocks selling off into the close, were predicting four more interest rate hikes or four in total for 2018. that's more than what they expected heading intthis year. that's a good sign that the federal reserve believes the economy is moving with theest be jobs market in 50 years. the question is how does it impact you? let's start with the good news. if you have money in the bank, you get a higher savings rate. that means you're paying more for mortgages, for credit card debt and auto loans. not a lot more. for auto loans, if you have a $20,000 car, yourayment may be $30 more a month. it's a bit concerning that we're looking at the highest number of household debt. $13 trillion. that's more than 2008 and that number grs. one thing that caught w

. >> is a compliance officer with the federal reserve, a government employee, your focus was goldman sachs. where were you located, what work did you do. >> at the time, these employees, and what that meant, >> what was a typical day. >> you get up early in the morning. and hit the news and cable wire. and go into the office and what you do, you spend a lot of time reading. preparing exams what is not working. and executive the goldman sachs. >> and all the time. >> and scheduled ahead of time and there were topics, and which topics at that time. and all these things, there were a lot of them. >> what would you do something with not being complied with. what you're supposed to do, and write down they need to fix it, and how they should take fixing it and an enormous amount of data gathering to produce those reports. >> your book is called noncompliance. what was goldman sachs doing, is it illegal or however you want to praise it? >> it wasn't just goldman sachs, there were -- it was easier for me to say what you are complying with. >> the gap between those two is big. it was difficul

and the federal reserve has proposed a change to the so-called volcker rule the provision named after a former federal reserve chairman paul volcker was crafted in the wake of the great recession and included as part of the wall street reform and consumer protection act of two thousand and ten more commonly known as dodd frank five. different financial regulatory agencies devised the final regulations based upon the law specifically the volcker rule made it unlawful for banks to speculate using their house accounts that is it made it illegal to use investors or bank money for purely speculative purposes they could still speculate but only as a legitimate business hedge the reason being big bank speculation on things like mortgages related to credit default swaps those c.d.'s were part and parcel to the economic calamity and led to a big bank bailout using taxpayer money to the tune of seven hundred billion dollars well now the fed is proposing to scale back the volcker rule some like me who had a hand in writing and voting for the original volcker rule are extremely concerned that if

mega banks seem primed to pay out record dividends the federal reserve is prepared to release a guidance on exactly how much they can put in the pockets of shareholders without endangering the nation's financial systems barclays research says the twenty two largest banks are expected to pay one hundred seventy billion dollars in dividends this year if that level is reached it would be the largest dividend payout since the financial crisis of two thousand and eight the shadow of two thousand and eight looms large as the first around the federal reserve famed stress tests on banks will be announced this week the first round looks at whether a bank can handle a crisis the second round looks at the bank's capital management plan which includes dividend payouts and judges whether the bank's plan can move forward the tests were post two thousand and eight reforms meant to give clear warning of systemic risk and prevent another crisis or even financial collapse analysts that top market watching firms do not expect the dividend plans to receive much pushback from the federal reserve under the ne

and the federal reserve has proposed a change to the so-called volcker rule the provision named after a former federal reserve chairman paul volcker was crafted in the wake of the great recession and included as part of the wall street reform and consumer protection act of two thousand and ten more commonly known as dodd frank five do. financial regulatory agencies devised the final regulations based upon the law specifically the volcker rule made it unlawful for banks to speculate using their house accounts that is it made it illegal to use investors or bank money for purely speculative purposes they could still speculate but only as a legitimate business hedge the reason being big bank speculation on things like mortgages related to credit default swaps those c.d.'s were part and parcel to the economic calamity and lead to a big bank bailout using taxpayer money to the tune of seven hundred billion dollars well now the fed is proposing to scale back the volcker rule some like me who had a hand in writing and voting for the original volcker rule are extremely concerned that if adopte