the fed. >> i don't know. john: a small group of old, white people who get to spend trillions of your dollars in secret. >> no secret to ball of government officials should have the authority to create money out of thin air. john: are you fed up with the fed? that's our show tonight. ♪ >> and now john stossel. john: i have done hundreds of tv shows, but there is one topic i have always avoided, the fed. i know is important, more so than most of what i cover, but it is so complex injury. people in charge even work at being tall. al greenspan called it fed speech and tried to be obscure because he did not want to spook the market. bernanke and janet yellen, but the fed is crucially important. it can destroy your savings, affect whether you have a job or a future. i wish there were a simple way to explain what it does which is why am thankful their is a new film out about the fed called "money for nothing". jim bruce made the film, and befo we get your movie of want to play a part of the video made by the federal

the fed. >> i don't know. john: a small group of old, white people who get to spend trillions of your dollars in secret. >> no secret to ball of government officials should have the authority to create money out of thin air. john: are you fed up with the fed? that's our show tonight. ♪ >> and now john stossel. john: i have done hundreds of tv shows, but there is one topic i have always avoided, the fed. i know is important, more so than most of what i cover, but it is so complex injury. people in charge even work at being tall. alan greenspan called it fed speech and tried to be obscure because he did not want to spook the market. bernanke and janet yellen, but the fed is crucially important. it can destroy your savings, affect whether you have a job or a future. i wish there were a simple way to explain what it does which is why am thankful their is a new film out about the fed called "money for nothing". jim bruce made the film, and before we get your movie of want to play a part of the video made by the fede

>> the what, the fed? >> the fed. >> f-e-d, fed? ittle about the federal reserve even though it has the power to play around with trillions of our dollars. i should report on it but the details are boring and i work on competitive television. if i bore you and you stop watching i lose my job i lose the show which i would like to ep couldn't. i have avoided the show on the fed until now. you don't see any writers put out best sellers about the fed. his latest book is a best seller and it is about the fed. why did you put in this boring institution? >> it is not that boring. the i write thrillers. so my job is to give you a great beach read from cover to cover. but if you walk away from the book having learned more that is good. the fed is fascinating considering how much secrecy it shoruds itself with on purpose. they formed is in secret. federal officials stormed out didn't even use the train station here they went to hoboken said they were going on a duck hunting trip. they went down to jekel island and hatched a plant. >> prooef yu

. >>> what's the fed? >> the fed? f-e-d, fed? the federal government? >> what's the fed?> the fed? i don't know. >> most americans don't know. we give the fed enormous power. the fed loiks that. >> americans have always been reluctant to give too much financial power away. that's smart. but we still need somebody to foster conditions for a healthy economy. >> really? your dollar will be worth just as much tomorrow as it is today. >> the dollar lost 96% of its value. >> he said housing prices wouldn't crash. >> pretty unlikely possibility. never declined house prices on an admission wise basis. >> he said, they're not printing money. but they do. now she's going to be in charge. >> it is definitely one of the most important economic decisions i will make. >> it is one of the most important jobs in the world but the people don't know what it is. >> the fed, i don't know. >> the fed is small group of old white people who get to spend trillions of your dollars in secret. >> no secret of our government officials should spend money out of thin air. >> are you fed up with the fe

thank you. >> you are the fed owl. ot a graduation cap and eating a tootsi pop. >> i'm on the show and he insults me. >> do you think you're safe from the obama care rollout? we'll explain. >> the high price of the tickets to the sox game tonight. love you, steve. i mean that. the american dream is of a better future, a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. . >>> the chairm

what the fed did was twofold. upplied liquidity, through ordinary open-market operations and through use of the discount window -- very standard techniques of supplying liquidity. but, under the guidance of chairman greenspan, they also sought to reduce the demand for liquidity, in other words, to use what you might call tender persuasion to convince people that they needn't go seeking liquidity, bidding for liquidity, that it would be there. schoumacher: in 1929, the fed tightened the money supply. this time, greenspan did the opposite -- the fed's message was, whatever you need, we'll give you. greenspan had said the magic words, but was anyone listening? on tuesday morning, the market continued its dive, plunging 225 points. by noon, the market was approaching complete meltdown. buying was at a virtual standstill. then, buy orders began trickling in, like water upon parched land. the buying trend accelerated, and wednesday morning, the world awoke to headlines touting the largest rally in the big board's history

treasury can you update us on this show only if we can get to the fed right after this only ok ok we got it we showed the start a couple of days ago this is before the shutdown actually occurred was we're still in progress and the resolution has yet to occur at the very bottom we see this is one month three months six months twelve months out and this is how far the treasury is trying to borrow and on the y. axis we have point zero five percent all the way up to a whopping point thirty five percent we can see borrowing costs for the government were very close to zero on september thirtieth and then we fast forward a couple of weeks to right before the resolution took place and the short term four week bond market had spiked in terms of yields almost up to the thirty five basis point mark well that was not acceptable so what happened when when we finally reached a resolution yes the green light shows that the short at the very left and that's actually below where we were at the beginning of this crisis so yes the new normal is is back open this is the new normal now let's focus our att

following the fed statement. you can see with a lower $3.40.e enduring a quarter of a percent moved to the downside, not too bad. last week crude virtually unchanged. down $1.30. that is what happened as soon as the market began to absorb what the article said. tapering would happen sooner rather than later. we have the statement from the fed, that we gave you. but we have every angle of this covered. head of treasuries, you may have seen the honda prices pare their games. and chief economist at first trust. see the rest of you guys in a minute. what do you make of it? >> it is clear, it has been fickle to any announcement coming out of the fed, washington or the "wall street journal." it is clear the market did not move on the fed announcement. when he announces a december taper is not off the table, we are off to the races and the machines kick in and start selling off on that news. buit has become pretty easy to trade. listen to the fed announcements, get ahead of it. people are trying to estimate and get ahead

and currency markets into a free for all in april of this year all because you simply hinted that the fed would eventually trim quantitative easing you know what captured the world's attention was the troops last week affair with the shutdown that we're calling a debt trench as an whole never mind the very institution charged with funding the nation's purse held the world never mind that at all but fortunately the markets have resumed some level of normality and america's favorite band is being safely webcast to an i pad near you thank goodness two joining me now to discuss it all is bob a little wary and hello hello now bob before the end of the shutdown you know we took a look at the evolution of the borrowing costs of the u.s. treasury can you update us on this show only if we can get to the fed right after this only ok ok you got it we showed the start a couple of days ago this is before the shutdown actually occurred was we're still in progress and the resolution has yet to occur at the very bottom we see this is one months three months six months twelve months out and this is how fa

the fed's effectiveness depends on the commencement, ingenuity and integrity of the fed staff and my fellow policymakers. they serve america with great dedication. mr. president, thank you for giving me this opportunity to continue serving the federal reserve and carrying out its important work on behalf of the american people. [applauding] liz: while not yet confirmed, she nonetheless makes history as does the president who called her a proven leader and brooklyn a brown graduate and the professor and longtime fed member who has been called one of the best fed forecasters has been nominated as federal reserve chairman. i guess it will go by chairman even though it is chairwoman. watching this pretty historic moment. the big question comes she didn't give any hint what she would do as bond buying purchases are concerned, so what is the next step? ben bernanke still has a few more months to go. >> about the chairman out of want start the program before i left with the way things are between the executive and legislative branch, i don't know if she will get that opportunity. it will com

she's currently number two at the fed. it's expected that she'll likely continue with what we have seen from bernanke, keeping interest rates low continuing with a bond buying program. the big question from her, if she does get the greenlight, when will she scale back the bond buying program. she's no stranger to the fed or to washington. she was a part of the counsel of economic advisers under clinton. and by the way, she will become the first democrat since paul volcker if she is confirmed. will she be confirmed? john cornyn the number two in the senate expressing reservations about her. it's expected that she will get the nod, that she will get enough votes to move forward. as we have seen, of course with this government shutdown, nothing is easy here. so i anticipate there will be to some extent a lot of discussion, a lot of back and forth about her nomination. but it is expected to ultimately she will get confirmed and luke russert will have a lot more on that. luke? >> yes, indeed, kristen, sort of to echo your own co

eighty eight billion dollars the fed remits all of its profits to the treasury so the more the fed paysut and interest on these reserves to banks the less. it gives back to the treasury or the u.s. taxpayer there was a trick question there. are question i love it now the real question is why is the fed paying interest on answers on reserves and second question more importantly can i keep my money if. you cannot keep your money at the vet only member banks now i did find a two thousand and eight fed press release which stated quote the payment of interest on excess reserves will permit the federal reserve to expand its balance sheet so basically the fed has pumped three trillion dollars into the economy through q.e. and it's now pulled two trillion back out by paying interest on reserves well there you have it thank you just in and bob actually you recently sat down with the stockman to discuss this very subject now yes i did i spoke with david sparkman and he is the director of the office of management and budget under reagan and i asked him about how the fed will keep reining in what i

the bernanke fed, the greenspan fed. it will you-l now be the yellen fed. you heard her talk about the personal -- how she takes this stuff very personally. and the ideas of continuity, trust, consensus building, all very important, and communication. i think you'll see that from janet. i do think you'll see she is committed to stimulus. no question about that. but she does have an entirely different set of challenges to deal with than ben bernanke did. that's not only stimulating the economy, dealing with these external shocks from its own government, washington and shutdowns, but also dealing with the wind down, eventual wind down of the balance sheet. that's very difficult. >> i had a thought while i was watching janet yellen. the fed has not done a good job or been able through ben bernanke able to connect with the american public. i thought janet yellen looked to me like maybe she has a chance. >> she has a great chance. >> to talk to the public and explain what the fed's doing and why they're doing it. over the course of the last five years it's been u

you don't fight the fed. ce to be right now is the equity market. >> is that where you are? >> that is where i am. i don't see any justification unless you're a very old retired person to have any exposure to the bond market. i don't understand it long term. especially any kind of long term investor. you have to have exposure here. even utilities of all places seem to be giving me an indication of interest. >> they pay interest. that's why. thanks, ben. so we're going out. again, the story today, the s&p 500 at a new all time high. the dow down about ten points. blame ibm. get ready. here comes google's earnings as we get ready for the second hour of the "closing bell." >>> look at that. it's a fresh closing high for the s&p 500. the dow jones industrial average just shy of turning positive after being down triple digits at the open. welcome to the "closing bell." kelly evans in for maria bartiromo. bill griffith with me. two greens. a far different picture than how things looked a few hours ago this morning.

so what can the fed do? it can reverse course. it didn't actually begin anything, but it said it would give out doing it sooner hearing so rates dropped -- doing it sooner. the freddiepped. mac number today was 4.23% on the 30 year. so it's lower than the recent high. so that will indicate we will see more refinancing in the fourth order. -- fourth quarter. what to see about that. but to me, this is the classic push me pull you whipsaw in the industry. the stop -- let's talk a little bit about the mortgage business. i was at a conference this summer in detroit i have been thinking about a little bit about detroit and new orleans. a few years ago, i don't think i could have awesomely conceived -- could have possibly have conceived that the greatest damage to two of our greatest cities. but it did. in new orleans, it was the storm came in detroit, it was more of an economic storm. so you have seen some recent green shoots there. detroit was number two for home price increases. it was up 4.3% for the quarter. 23.3% for the year. of co

at what point is the fed no longer assisting the market, but at what point is the fed the market? so the fed is no holding roughly one-fourth of mortgage-backed securities outstanding. they have purchased about 30% of all the mortgages originated since last summer. that's not securitized. that's total mortgages originated, and that unless we see some tapering through 2014, they will be by more than half of all the mortgages originated. again, not just securitized but those originated. i think that raises the question then, what happens if the mortgage market tapers and the fed doesn't? do we want the federal reserve to have that size role in purchasing this many of the mortgages it originated? and i would defer to my colleagues here as to say, what would happen if we saw similar behavior in greece or some of the other countries, if a central bank said we will making this purchase for such a large share of the lending that takes place. finally, than what is the fed exit strategy from this? are they in fact been going to start selling these at some point with upward pressure on inte

eastern when the fed news came out. mpson, let's talk about the word on the floor with a market down 64 on the dow. >> off the lows of the day. the markets have been trading in a fairly narrow range until the fed released its statement at 2 p.m. basically what happened is initially the reaction was the market was not much of a change from the prior statement. but then traders took a closer look at it. essentially what they're focusing on is what isn't in this statement. one line in particular that's been pointsed out to me, this being a statement that was in the last -- or a sentence in the last statement reading the tightening of financial conditions could slow the pace of the improvement in the economy and the labor mrashgt. that was not in this statement. basically one risk the fed saw has been eliminated. that leads some to believe the fed is less dovish, meaning it will start to taper or qe will start to end sooner than some expected. where did you see it most as we mentioned the dow has come off the lows of the ses

the fed was well aware what the markets expected. said several times in the minutes and several members say the decision on the taper was a, quote, close call. i want to go through each side here. supporting a taper, the economic data consistent with -- was consistent with taper from new. cumulative progress in the labor market, the credibility of the fed at stake and concern that no taper would send the pessimistic be message on the fed's economic outlook. on the other side those saying the data had been disappointing, the debt ceiling debate loomed, interest rates were up and they actually were specific about concerns about the effect of rise in interest rates on net interest margin and a risk management approach saying the better part here, the more prudent approach was not to taper. but we also learned in these minutes is that the federal reserve staff gave what i consider to be a very -- series of pessimistic warnings to the fed including concern about the effect on mortgage rates and mortgage applications. the effect of financi

and that's what she's been working on at the fed. she's been working really hard on communication strategy and key to communication is building consensus. you need to have the consensus view around the committee. and i don't think there's anyone better than her at doing that so i think she's going to be very good fed chairman and transition very nicely away from the bernanke fed. so i think we're in good hands. i think we'll be in georgia shape. >> rose: transition away means what? >> well, it should be a seamless transition so that it's not disruptive to the financial markets, particularly in a very uncertain time given what's going on with fiscal policy and what's going on with washington. we need to have a seamless transition between chairman bernanke and the new fed chairman yellen. i think they're all basically cut from the same cloth. they've been working together for so long i think they're on the same page so this should be a very seamless transition. again that's vital in the context of all the uncertainty that we're trying t

the fed mentioning inflation here. n though yesterday said or recently said we could have double-digit inflation. the concern is stagflation. david: i know a lot of people are making money with their investments on wall street, but people saving money, 2% is enough to wipe out all of what they are getting in fixed income. with the low interest rate doing a lot to hurt particularly the retired people. liz: we are well off of our highs of 2007. it is low inflation as well. david: there is one thing that has to be emphasized. when you look at food and you look at oil, which is not in these figures, you are seeing very high inflation. six to 8% as a result of the stuff people have to buy. people cannot afford not to buy gas or heat their homes with oil. tracy: tuition has jumped exponentially. liz: another issue that matters. ashley: time goes so quickly when they are here. david: we talk a lot. ashley: keep it right here on fox business. talking earnings with the cfo of gps defines maker garmin. pathetic. tracy: all right,

they like what the fed's doing. don't worry. it it rights itself in a couple of days. just stay the course. "mad money" will be right back. >>> coming up. silver spoon? from the breakfast table to taco night, b & g foods have it covered. do these brands belong in your portfolio as well as the shopping cart? find out when cramer speaks to the ceo. ask later, savor the flavor. buffalo wild wings is up big this year and a piping hot earnings report has its stock up again today. plus as it takes beer, wings and sports internationally is the real growth story still coming or is it it ready to cool off? don't miss cramer's exclusive. plus, electric slide. american electric power ran out of juice as wall street turned its attention towards interest rates. is that decline offering an opportunity to plug into its outside dividend or will regulation hold it back? cramer's talking to the ceo all coming up on "mad money." >>> don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer #madtwee

one of the fed's stated goals for qe. g the other way. 1.7% year over year the fed wants 2% so we are not getting closer to either objective of the federal reserve. >> there's -- >> green light for more buying of bonds. >> or at least remaining in place right now. >> there's also the disconnect between the way the consumer is feeling and main street is feeling and the exuberance the stock market is feeling. the stock market moving to new record highs almost on a daily basis based on the fact that they're counting on the fed to keep adding its accommodation. main street look at the employment numbers and it's discouraging. >> i think that's right and two things behind it. one is that the market is now convinced of a much longer period of quantitative easing and the second thing is that court profits have been rising at a rate higher than gdp. that means profit margins have remained strong unlike other cycles we've gone up to this lofty level about 12.5%, 12%, corporate profits a percent of gdp and stayed there. >> the relea

and then in the aftermath of that the fed was very accommodative. the sedative peel the housing bill which burst in 2008. now arguably in 2013 we may have created or at least started to create another equity bubble that in some areas, and some real-estate markets is also turning into a global. new york city, toronto. other urban centers, especially those attractive to foreign buyers are seeing very rapid increases. more rural areas, that is not happening. so how do we respond to this and what does this tell us about the future? one of the things that has emerged here is that the financial and real-estate markets have, and the united states and, perhaps, elsewhere, have developed the uncomfortable codependent with the central bank. that is the markets, especially equity markets in the last several years some the very resilient in the face of threats. we saw this in recent weeks where all of the arm marine command training, and talking about we're going to defaults, markets were pretty calm about it. in fact, downright cold. the minute there was a sett

we expect the fed to print enough money to help us get out of it. heard the exact stuff we'll hear from rand paul during confirmmation hearings. >> not only that. i agree strongly on this point, she will be hearing that in the committee room too. there are a lot of people who will be bush pushing her to get out of this. as we reported earlier this week, it's not just the traditional hawks that we talk a lot about. the presidents of the regional fed banks of richmond and dallas and kansas city. there are governors at the fed ironically appointed by barack obama himself who are getting itchy about this thing and they don't want to see the balance sheet geting a lot bigger and they want to start heading toward the exit. so she has a very hard challenge on her hand. a weak economy. a divided committee. and, and, a group of people who want to stop the thing. david: well, and then, michael, final point, we also have the problem with the fed seeming to be too compliant towards the treasury. there issalways this balance about how independent you can be from

the fed is and must always be independent. i want you to know that i am very grateful to you for being such a strong partner in helping america recover from the recession. it is no surprise as the son of a pharmacist and schoolteacher -- isben bernanke has the the academy of death is the opec to me -- is the academy --is the epitome of calm. he has been a voice of wisdom and a steady hand. at the same time when faced with potential global economic meltdown, he has displayed tremendous courage. he took old action that was needed. he helped us stop the freefall and stabilize financial markets. thiscredit flowing again. has made a profound difference in the lives of many americans. a lot of people are not sure what the federal chair does. but more families were able to afford new homes and businesses could hire workers. more people could pay their mortgages and car loans. it meant more growth and more jobs. i would add with his commitment to greater transparency and clarity, he is also allowed us to better understand -- the work o

the fed wants that closer to 2%. we're close to the target but it's a tale of two inflation metrics. if we divide that into goods and services, the goods component is extremely weak and it's in negative territory right now. that's holding down the overall metric. it's making it look misleading it low. >> even though it's a broad measure. >> exactly. the reason that's happening is because the dollar has been strengthening. it's up 5% compare to most of our major trading partners. the strong dollar means that import prices stay down and import fries ar prices are fall. it's a sign of a strengthening dollar. and the service sector where metrics are going up about 2.5%. >> the fed was concerned about the affect of washington's dithering and debating on the economy. they weren't entirely clear about it, because the feds are never entirely clear on anything. but they did imply if you were thinking about pulling out $85 billion a month, the stuff in washington caused them to be in that business a little longer. >> absolutely

what spooked the markets was the fed statement that followed. while the central bank intends to continue the the easy money policy known as qe-3 the statement removed references found in earlier ones in threats to the economy and many saw this as a sign the fed thinks the economy is strengthening and might end qe sooner rather than later. larry, back to you. >> mary, why do you know more about this than i do? so facebook reports pretty good earnings and the stock jumps up big, but then the stock goes back down. is that just thin trading after hours or what? >> i think some people maybe were disappointed that the earnings weren't stronger than expected at that point. as you said, they both beat on the revenue as well as the earnings side, but there seemed to be some disappointment after hours and people were looking back and saying it wasn't the blockbuster report they were expecting. >> mary thompson, thanks very, very much. now let's talk to andrew bush, author and publisher of the bush update. peter schiff joins us, the ceo of euro pacific capi

i think the fed's already hit the inflation target, and today need to admit it. thank you. >> thank you all. during chris' comments we should have put your last slide up again. mark? >> john. >> quick response to two points. quantitative easing, i should have distinguished between marginal and average impact. certainly, quantitative easing has had a support i impact on the -- supportive impact on the economy and had it not even been attempted, i expect we would have been having slower growth. i'm really thinking about if janet yellen -- let's suppose the economy slows down for whatever reason. is qe4 going to do as much as qe3 and qe2? i'm concerned it's not, so i'm really concerned about the diminishing marginal impact. the bubbles question, i guess i should add to her speech i think janet needs to be very clear that the fed will be watching asset prices on both sides; that is, if there appears to be a bubble, they will take that into account. that is a very delicate discussion. it's sort of the inverse of chairman greenspan's 1999 testimony where he said we can

i believe the fed is starting to lose the bond market. if that develops, you will profitably be short, something that has been next to impossible to do for four years. so that's why i would like to get in position to be able to get set up to take advantage of the fact that one of these days the fed will not be able to continue on its mission, which is to print as much money as it deems necessary. those policies -- wait those policies created both bubbles, and the misshapen warped economy we have today. the fed is not the solution, it's the problem. end of my speech. sorry. what's your question? >> sorry to interrupt, bill. a trigger to start going short from the bond plarth. in other words, is there a level of rates, you know what now is the time to get back in the market and short? >> that's a good question. listen, when you see what the market is telling you, obviously there's a lot of guesswork. right? and so the reason why it matters what the fed is doing, is my experience in running a short fund in the post 2000 decade if the fed was

i don't think it won't be up to the fed to taper or not. it will be the economy forcing the fed to do it. >> i think we're talking about no tapering for the rest of this year. >> i wouldn't be surprised if there's no tapering in 2014. >> come on. >> this is the fed which has been postponing the day of reckoning for the last five years. >> if we don't get tapering, what are your stock picks, both of you? >> you need to own stocks if you're going to be very nimble and go a bit more aggressive for the next three or four months because the stock market will be further boosted by the fed but be prepared to get out. go into high dividend stock, health care. finally, expect a high grade income to continue to go down in yield and the income will be your save haven. >> how do you allocate capital? >> i would allocate toward bonds. i think it will yield closer to 3%. i think it will go higher next year again. i would be away from fixed income and more toward equities. i'd allocate more offshore. i think the european markets are f for real. >> we'll le

it's a debate about the current fed policy. d it's interesting to start with this, the word continuity. i think that you won't see any significant difference between the bernanke chairmanship and the yellen chairmanship. they believe that given all of the information that they have about inflation and expected inflation, and given all they have about the fact that the u.s. economy is performing way below potential as measured by the unemployment rate they believe it's the best fed policy right now is to keep interest rates near their zero bound and use quantitative easing. they've been very clear about that, and they've been very clear about the evidence they will look to when they make the decision to continue or to begin to taper. there is no hiding here in terms of what they're thinking and what they're looking at. >> you would acknowledge there is some danger, some risk to use quantitative easing, there could be unintended consequences. >> i think the unintended consequences are basically alleged to be about the build up of

the old adage is you don't fight the fed. the dropping of the five-year to 2.5%, to invest in assets gives them greater return. >> one question. here we are at the beginning of the season, not seeing gang buster growth, not seeing much traction in revenue growth, which is indicative of market demand. without the fed is this economy, is this market trading at expectations that really are way over the top here? i mean, what do you think, joseph? >> i think you have seen a pretty amazing rally in the equities markets this year. you have prices moving at a faster pace than earnings. as a result, you take a look at valuations. we're getting closer to fair value. i don't think that necessarily means the fed is really pushing this market along. i continue to believe, as far as tapering, it's really a matter of when and not so much if. the underlying fundamentals remain in place. i think you'll see the fed announce tapering some time next year. >> mark tepper, what do you think? now marc faber has put on the table his thought they sho

it is measured by the fed which is as good a measure as any. the recovery has been about 92% of pre-2007 levels which is good. but i think most american households have developed the notion that they ought to be getting a little bit better off every year and to have gone seven years without real obtaining the old level of net worth is obviously problematic. the result, there are two results. one in terms of consumption if you look at an adjusted consumption pattern and the charges -- the paper here on the wealth accumulation consumption is very weak. this isn't a macronumber obviously. some people are doing very well and others are not. but if you look at it on a macrobasis, consumption is running way behind a typical post war expansion on the order of over a standard deviation below the typical point at which we find consumption this far into the recovery. remember the recovery began in june of 2009. and it's probably a reasonable date. things got so bad that they started to look a lot better by the middle of 2009. and now i think so that puts

the fed has 22,000 employees. t clears your checks and your atm withdrawals and provides economic forecasts. but one of its most important responsibilities is regulating the nation's biggest banks, to be the watchdog. you're supposed to keep them out of trouble, so how did all this happen? >> well, a lot of mistakes got made, no question about it, but, you know, this was a much bigger thing than any single firm or any single individual. over the last dozen years or so, enormous amounts of savings has flowed into the united states and some other industrial countries. that savings has come from china and east asia. it's come from oil producers. and it has--hundreds of billions of dollars has come into our financial system. and, you know, that would be great if we took that money and invested it wisely and got a high return. but instead, our financial system didn't do a good job. we had a regulatory system that was like a sand castle on the beach. when you had little small waves just lapping up against the sand castle