joe gagnon senior fellow is an associate director of the division of monetary affairs of the u.s. federal reserve board. prior to that he was associate rector of the division of international finance and senior economist. he is taught has taught at the university of california's school of business. joe if he could start our discussion off. [applause] >> is very wicker or is someone going to turn the page? thanks for having me here, michael and i would like to talk about what the federal reserve can and should be doing to help restore full employment. let me just start by saying that it is true that we are, the federal reserve has said its policy rates at zero, the lowest it's ever been and that is the bounds for reasons i won't go into, but it doesn't mean that it is all the federal reserve can do. the federal reserve, monetary policy works in general by tilting the balance between savers and spender so when monetary policy wants to increase spending coming and going, they lower the rate of return to savers which makes it more attractive to borrow and spend. when they want to slow

host: joe gagnon? guest: i can disagree with veronique. both parties promised more than they can deliver, and it is unfortunate. host: what is the expect on -- what is the effect on the stock market now? guest: was markets to not worry so much about what they consider political theater. obviously if it goes further, we mentioned there are things that geithner can do, but some of the things might scare the stock market. selling gold might do that. if it strings out too far, it might start to scare the market. host: let's go to fort bragg, north carolina. felix, good morning. caller: how are you all on this beautiful morning? host: great. how are you? caller: we seem to be having an argue -- an argument and a debate over the region between the tax-and-spend democrats versus the borrow and spend republicans. it is my understanding the debt was about $1.4 trillion in 2009. the thing about this tax-and- spend type thing. it is my understanding that from 2001 to 2008, tax codes cost about one. trillion, about $1.7 billion given out in taxes, $1.

host: joe gagnon? guest: i can disagree with veronique. both parties promised more than they can deliver, and it is unfortunate. host: what is the expect on -- what is the effect on the stock market now? guest: was markets to not worry so much about what they consider political theater. obviously if it goes further, we mentioned there are things that geithner can do, but some of the things might scare the stock maet. selling gold might do that. if it strings out too far, it might start to scare the market. host: let's go to fort bragg, north carolina. felix, good morning. caller: how are you all on this beautiful morning? host: great. how are you? caller: we seem to be having an argue -- an argument and a debate over the region between the tax-and-spend democrats versus the borrow and spend republicans. it is my understanding the debt was about $1.4 trillion in 2009. the thing about this tax-and- spend type thing. it is my understanding that from 2001 to 2008, tax codes cost about one. trillion, about $1.7 billion given out in taxes, $1.7

we will begin with joe and then i will introduce the other panelists after the presentation joe gagnon is a former visiting associate director of the division of monetary affairs at u.s. federal reserve board. prior to that he was associate director of the international command and senior economist and has taught at the university high school business. joe if you can start the discussion off. [applause] >> is there a quicker than i can -- is somebody going to turn the page? >> thanks for having me here, michael. i would like to talk about what the federal reserve can and should be doing to help restore full employment. let me just start by saying it's true the federal reserve said the policy rate to zero, the lowest it's ever been and that is bound for the reasons i won't go into. but it doesn't mean that it's all the federal reserve can do. the federal reserve monetary policy works in general by tilting the balance between savers and spenders so in the monetary policy wants to increase spending to get the economy going, they look for the return return that makes it more attractive to