i went to get to the fed goal of unemployment. give me a picture on what you consider to be full employment. >> i don't have a precise estimate, but every three months all of the participants in the fomc turn at and indicate what they think normal, long-term levels of unemployment is. in our most recent survey in september, the range of opinion was 5%-6%. >> what you believe the real unemployment rate is today? >> the measured unemployment rate is 7.3%. >> the measured unemployment rate is 7.3%. as discussed previously, we have very high incidence of involuntary part-time employment. we have all too many people who appear to have dropped out of the labor force. >> would you agree that it is close to or probably over 10%? >> by broader measures, if that high. >> would you also agree that right now in america we have the greatest income disparity that we have had since the great depression?

the fed, right? you have easy money all aren't the world, japan, the ecb. we had rates moving lower this week elsewhere. tell me about playing into that. would you invest internationally elsewhere? >> yes. the market is itching for the bank of japan to come in with another round. quantitative easing is -- it works it's way around the world and money goes -- back into japan, it will go into exporters, it will go into small and midcap. keep something in mind, the bank of england had said in june it was going to keep rates low for a long time. forward guidance they have never done. guess what? the market is dictating that the bank of england may have to start raising rates because the economic data are picking up. the worst thing that can happen to the markets is that the fed is behind the curve. >> and i'll just point out, especially for those on satellite radio listening in, that the dow is starting to fall precipitously down. almost 100 points right now. the other averages are going as well. steve lie

the day. this is a data-dependent fed. whatever happens with the data, that's why the important thing i think to watch is how they articulate which data they're watching and what the levels are that are going to indicate how they exit. this fed has been itching to exit for years. she understands, of course, how weak the economy is. but what i mean is that they would love to be the ones to begin as soon as possible winding down the unusual perhaps but the data keeps confounding that desire. >> i want to go back to a comment that carl made. the chinese were really horrible enemy communist country before kissinger went over there with a little ping-pong and nixon made it. yellen is the only adult. she's going there and talking to both sides. think about how revolutionary that is. >> she wants to get confirmed. >> that's okay. i still think she's talking to both sides. the last time we had this level of partisanship, which i believe was 1861, no one was there talking to the other side, they weren't going over there to the conf

she insisted that the feds' moves of designed to businesses to expand and higher more people. d stimulate demands in the economy which should create jobs. yellen is expected to sail through the confirmation process in the senate and as vice chair of feds she gets the job automatically if no one else were cleared for it anyway. become to all that money, that $85 billion a month. where is it? what happens to that money? here is patricia. >> reporter: since the height of the 2008 financial crisis the federal reserve has injected roughly $3 trillion of new money in to the economy. through quantitative easing or q.e., the fed buys treasuries from banks by crediting their accounts with money that didn't exist before. now on round three, q.e. is designed to flow in to the broader economy by raising the prices . by lowering borrowing costs the fed hopes to boost consumer demands and provide incentive to expand production, creating jobs and economic growth. while growth has been stuck in low gear, the feds' bonds-buying spree has helped many parts of the country rebounds. driven investo

the fed is in fact as the chairman said over and over again the fed is very transparent and what is transitategic plan as how to go for war. david: well your successor at st. louis, current st. louis fed president, james bullard was talking today about tapering as though it could happen as soon as the next meeting. there seems to be, sort of a momentum in that direction but that doesn't represent the majority, does it? >> who knows. who knows. i think jim it correct that it could be at the next meeting. whatever the fomc decides the next meeting but the fomc is created a problem for itself. it has said, over and over again, that it will not raise the policy rate, the federal fund rate, until after it has stopped the quantitative easing. so, as they consider what to do with quantitative easing, it is inevitably a signal that they are putting policy rate on the table. maybe not right away, but it's on the table. david: right. but, jon hilsenrath, to the indecisiveness question, i didn't see a consensus in that report. did you? >> here's what i think i see. and this relates to what mr. poole i

and where he has led the fed. he just gave a speech in which you really try to clear the air because there has been a lot of misunderstanding and miscommunication between the fed how he isrket over trying to ensure that the recovery will be sustainable. he gave a speech in which he said hey, guys, i want to make sure you understand what we're doing. he really try to explain the difference between two of the fed's big policies right now. and itsulus program control of short-term interest rates. says ita program that will probably stay in place for some time. topic, thee overall issue is transparency. upper nike has let the public or at least those in the know know about the fed. guest: historically the fed has been known as a very secretive institution. back when alan greenspan was chair at the fed there were stores about how investors used to look at the side of his briefcase to determine what he was going to do in the marketplace. those days are over. now the federal reserve has press conferences after its meeting

the fed is tells us they want to taper. they don't want to continue to expand the balance sheet and want to do it based on their assessment there is sole jid growth and substantial improvement in the labor market. there was fears with the data and also with the concerns about washington, and also, something we've seen as the fed concerned that the market was linking tapering to rake's guidance. what we've had in the last number of weeks is better economic news, the fears around washington fading and the markets price the rate expectations, all of which puts them back on track for tapering if we get good numbers in terms of the labor market at the next one or two reports. >> but ben bernanke is constantly having to defend the fed for sending what is perceived to be mixed signals. one in the spring, setting a timetable and the argument and now talking perhaps about changing the benchmarks they will use to determine when. is this a fed trying to deal with changing market conditions, or is it a fed that's losing credibility? do

but our expert says the feds may drop out sooner than later. plus why the president's about face on obama care could come back to haunt consumers in the long run, americans kicking the habit when it comes to credit cards, i am ali velshi and this is "real money." ♪ ♪ >>> this is "real money," you are the most important part of the show. join our conversation not next half hour on twitter using ajrealmoney. janet yell edge. that's her over there. but first she needs to get approval from the senate. on thursday she started that process with a bit of grilling from senators over the feds' multi billion dollars bond-buying program that works to keep interest rates low. fed chairs have a long history of monetary speak. an obtuse language that most americans find hard to understand. i was ready interpret a lot of her speech for you. but she is clearer than most fed officials. listen. >> i believe it could be costly to withdraw a commen commendatir fail to provide adequate accommodation. on the other hand, it will be important for us also as the recover

is the source of all corruption the fed is the ultimate evil we abolish the fed if we end the fed everything will be great the problem is i don't necessarily know what would happen tomorrow if the fed was a ball or should i i'm just wondering i know that you had some interesting points about the solutions that we could actually fix the fed well we haven't figured out how to. variously balazs in the fed you know that has to do with like overnight lending rates but one of the big things is abolishing the fed we had crushes the market went up and down way before the fed existed in one thousand thirteen and it always has having the fed their kind of uses it it's again it's designed to ease the tensions that come with it you know what you could do it takes more than thirty seconds to explain but i think that. some argue get rid of it have it be totally free markets but it's never really going to be free. of crushes that wall was intrinsic to a free market system if you want to be it or anyone or all casualties of the market and we're going to talk about those pick back up later thank y

and we're kind of looking at the fed as the reason for this. i think we should probably look away from the fed as the reason for this. >> you have to attribute much of the rally, though, to the fed, right? >> i don't think i do. i don't think i do have to attribute much of it to the fed. >> really? >> i don't either. >> i think the fed is certainly helping this climate. >> uh-oh. looks like we have a great cocktail debate on our hands here as far as can we attribute it to the fed or not. you know, corporate earnings have been okay. but you mentioned cisco. you're looking at revenue continuing to be on the light side. you're not seeing new net investment in the corporate sector that you typically see in a recovery period. but i guess, so, zach, are you seeing something else in the economy aside from easy liquidity or easy money that's -- >> i think a lot of the things in combination you're making money from is a global environment where they reap all the benefits of global economic activity with very few coasts. as long as that continues to be t

eastern when the fed and its to make a mac minutes were released. and at that meeting while they voted 9-1 to keep the bond purchases bi spigot open full blast, there was question questo what they were really talking about. look at why the market reacted the way it did. up 49 points. peter barnes has been going over the fed minutes with a fine tooth comb. lauren simonetti with the trader reaction. and $40 billion in asset management. we will get to steve in a minute. but which specific line moved to market the most here? speak out it is this one, many members stress data dependent asset purchase program and some pointed out if economic conditions warranted, the committee could slow the pace of purchases at one of its next few meetings. and got into the weeds of the labor market, but the october 30 meeting was before we got the october jobs report which showed substantial upward revisions in the september jobs payroll jobs numbers, so perhaps the markets were little bit spooked maybe the data would be coming in a little stronger than they had before.

is the source of all corruption the fed is the ultimate evil we abolish the fed if we end the fed everything will be great the problem is i don't necessarily know what would happen tomorrow if the fed was a ball or should i i'm just wondering though that you had some interesting points about the solutions that we could actually fix the fed well we haven't figured out how to. move very nicely in the fed you know that has to do with like overnight lending rates but one of the big things is abolishing the fed we had crushes the market went up and down way before the fed existed in one thousand thirteen and it always has having the fed their kind of uses it it's again it's designed to ease the tensions that come with it you know what you could do it takes more than thirty seconds to explain but i think that. some argue get rid of it have it be totally free markets but it's never really going to be free. of crushes that wall was the intrinsic a free market system if you want to be it or anyone or all casualties of the market and we're going to talk about this pick it back up later than

is the source of all corruption the fed is the ultimate evil we have all of the fed if we end the fed everything will be great the problem is i don't necessarily know what would happen tomorrow if the fed was a ball or should i am i'm just wondering i know that you had some interesting points about the solutions that we could actually fix the fed well we haven't figured out how to. abolishing the fed you know that has to do with overnight lending rates but one of the big. had crushes and the market went up and down way before the fed existed in one thousand thirteen and it always has having the fed they're kind of uses it it's again it's designed to ease the tensions that come with it you know what you could do it takes sadly more than thirty seconds to explain but i think that. some argue get rid of it have it be totally free markets but it's never really going to be free. of crushes that wall was the intrinsic a free market system if you want to let that be it or anyone or all casualties in the market area we're going to talk about this pick it back up later they get so much arg

our job is -- >> but to a degree in this case, it did affect the fed, did it not? >> well, we do have to take account of what's happening in the markets, what impact market conditions are likely to have on spending and the economic outlook. it is the case -- and we highlighted this in our statement -- when we saw a big jump in rates. we did have to ask ourselves whether or not that could

since the start of the qe, the financial markets have responded to pronouncements by the fed. are you at all concerned that markets are too driven by speeches and official pronouncements from central banks around the world? if the suggestion of tapering can contribute to volatility and asset prices, can we expect more volatility in the future? >> well, the federal reserve, and i think this is true of other central banks, we are trying as hard as we can to communicate clearly about monetary policy. both our goals and our intentions how we carry out programs. this is challenging. we are in unprecedented circumstances. we are using policies that have never really been tried before. and multiple policies, and we are trying to explain to the public how we intend to conduct these policies. it is a work in progress and sometimes miscommunication is possible, but i think my own view would be we certainly want to diminish any unnecessary volatility. sometimes there's volatility because we all learn news about the economy that changes our views about the course of the economy and the cou

she gave assurances the fed would keep on stimlating the economy. is this a buy signal for the markets? >> it's certainly good news in the sense that she communicated that the fed is going to remain friendly to the markets, meaning continuing this insurance policy the fed put in place through the bond-buying program at the same time she acknowledged better growth. she said the best of both worlds and saying remaining in the back ground is ensure anything going wrong but at the same time better economic momentum. sounds like a recipe for continued gains in the stock market. >> what about the bond market? yields fell today and last night when they first released her testimony to the senate banking committee, and rates hat been rising recently expecting a tapering by the fed sooner rather than later. do you see yields going further lower? >> you know, i think yields are in a range right now. i don't think anything janet said today is going to break them out of that. clearly, we were coming up on this december fed meeting about a month from now, a littl

that's going to happen -- >> although -- >> yeah, herb. >> although the fed, with the fed not tapering we still have the ten-year bond much higher than it was when they started talking about tapering. so is the bond market sort of ignoring what the fed has to say. that's been one of bill neckenstein's theory and considering a short fund again. >> i want to throw two things at you which some say is a sign maybe we're at or nearing a top. so either agree with them or counter them depending on what you think. number one, when you see a front page ad or article saying the retail investor is back and unfortunately history shows that the retail investor often comes late to the party and number two, we have had a red hot ipo market. what do you think. >> both of those are true, mandy. if you look at the fund flow data you started seeing money coming out of the bond market into equity markets in august and september of this year. the exact same time we're talking about tapering. the retail investor may be late to this market. what you have to throw back at that argument is, is it too late for

well couple things on that on that paper i mean the fed always speaks in code when they say you know we're lowering unemployment the unemployment target from six and a half to five and a half by the way if we go back to december two thousand and twelve i'm sorry december two thousand. december two thousand and twelve when the fed first announced that target it was never a trigger it was always a threshold in other words they didn't say we will raise interest rates went on a plan to get to six and a half percent they said we won't raise interest rates until it gets to six and a half percent but it could get a lot lower than that before we've raised in this paper this confirms that now saying five and a half but the point is unemployment is going down for the wrong reasons unemployment is not going down because we're creating creating a lot of jobs it's going down because labor force participation is collapsing that's extremely negative for the economy g.d.p. is really just the sum of labor force participation plus productivity so how many people are working how productive are they that

who the fed is working for the fed is working for the companies that own it and the fed the federal reserve system the united states is owned by private companies and they run it and so the fed will do what what's best for these companies and includes goldman sachs and all the big banks around the country and some institutions like general electric and this family also and iran and so whether the other central banks work for the fed i'm not sure but they're all working together that's for certain well all of this if you listen let me point out something here because in the united states they just went through all big wrangle on raising the debt ceiling and now they go through the same thing in a few weeks time they want to raise up seventeen trillion and beyond simultaneously mark carney the new chair at the bank of england said that he's going to expand the bank of england's by. and see it from something around four trillion pounds to nine trillion pounds so is that obvious that that this whole debt ceiling debate united states is the off draft is going to be dumped into the bank of a move

well couple things on that on that paper i mean the fed always speaks in code when they say you know we're lowering unemployment the unemployment target from six and a half to five and a half by the way if we go back to december two thousand and twelve i'm sorry december two thousand. december two thousand and twelve when the fed first announced that target it was never a trigger it was always a threshold other words they didn't say we will raise interest rates went on a plan i guess a six and a half percent they said we won't raise interest rates until it gets to six and a half percent but it could get a lot lower than that before we've raised in this paper this confirms that now saying five and a half but the point is unemployment is going down for the wrong reasons unemployment is not going down because we're creating creating a lot of jobs it's going down because labor force participation is collapsing that's extremely negative for the economy g.d.p. is really just the sum of labor force participation plus productivity so how many people are working how productive are they that's

well couple things on that on that paper i mean the fed always speaks in code when they say you know we're lowering unemployment the unemployment target from six and a half to five and a half by the way if we go back to december two thousand and twelve i'm sorry december two thousand. and seven two thousand and twelve when the fed first announced that target it was never a trigger it was always a threshold in other words they didn't say we will raise interest rates went on a plan i guess a six and a half percent they said we won't raise interest rates until it gets to six and a half percent but it could get a lot lower than that before we raise in this paper this confirms that now saying five and a half but the point is unemployment is going down for the wrong reasons unemployment is not going down because we're creating creating a lot of jobs it's going down because labor force participation is collapsing that's extremely negative for the economy g.d.p. is really just the sum of labor force participation plus productivity so how many people are working how productive are they that's

recession in two thousand and fourteen if we don't see any fiscal relief the fed will have to respond to that by increasing us or purchases now you have a long form of. paper your own otherwise known as a book that's coming out that's called scuse me the death of money the collapse of the international monetary system now let's point blank what would trigger such a collapse in your opinion. well collapse usually comes from a loss of confidence and confidence is a very intangible thing the problem with policymakers the fed in particular but also the white house and the treasury they use these equilibrium models and they think that you know if. high enough for a nominal g.d.p. high enough they can print money create some inflation get nominal g.d.p. on a sustainable path withdrawal policy replaced nominal g.d.p. with real g.d.p. as i say this is what the equilibrium models would predict and this is what they rely on but in fact the world is not an equilibrium system it's a complex system and complex systems are characterized by sudden sharp changes what physicists call phase transitions

goal ofo get to the fed unemployment. picture on what you consider to be full employment. >> i don't have a precise estimate, but every three months all of the participants in the fomc turn at and indicate what they think normal, long-term levels of unemployment is. in our most recent survey in september, the range of opinion 6%. 5%- >> what you believe the real unemployment rate is today? >> the measured unemployment rate is 7.3%. as discussed previously, we have very high incidence of involuntary part-time employment . we have all too many people who appear to have dropped out of .he labor force >> would you agree that it is close to or probably over 10%? >> by broader measures, if that high. >> would you also agree that right now in america we have the greatest income disparity that we have had since the great depression? widening wage inequality and income inequality going back to the mid to late 80's and it continues. >> i just want to take a minute to speak for those who are on the lower rent due the cap the fed poli

who the fed is working for the fed is working for the companies that own it and the fed the federal reserve system the united states is owned by private companies and they run it and so the fed will do what what's best for these companies and includes goldman sachs and all the big banks around the country and some institutions like general electric and this for money also enron so whether the other central banks work for the fed i'm not sure but they're all working together that's for certain well not all of this if you listen let me point out something here because in the united states they just went through all big wrangle on raising the debt ceiling and now they go through the same thing in a few weeks time they want to raise up seventeen trillion and beyond simultaneously mark carney the new chair at the bank of england said that he's going to expand the bank of england by. and see it from something around four trillion pounds to nine trillion pounds so is that obvious that that this whole debt ceiling debate united states is the off draft is going to be dumped into the bank of bank of

recession in two thousand and fourteen if we don't see any fiscal relief the fed will have to respond to that by increasing us or purchases now you have a long form of. paper your own otherwise known as a book that's coming out that's called scuse me the death of money the collapse of the international monetary system now let's point blank what would trigger such a collapse in your opinion. well collapse usually comes from a loss of confidence and confidence is a very intangible thing the problem with policymakers the fed in particular but also the white house and the treasury they use these equilibrium models and they think that you know if. high enough for a nominal g.d.p. high enough they can print money create some inflation get nominal g.d.p. on a sustainable path withdrawal policy replace nominal g.d.p. with real g.d.p. as i say this is what the equilibrium models would predict and this is what they rely on but in fact the world is not an equilibrium system it's a complex system and complex systems are characterized by sudden sharp changes what physicists call phase transitions

through quantity tative easing or qe the fed credits accounts with money that didn't exist. qe is designed to flow into the broader economy by raising the price of bonds the fed buys. >> buy lowering borrowing costs the fed hopes to boost consumer demand and provide an incentive for businesses to expand production. growth has been stuck in low gear. the fed's bond-buying spree helped many houses to rebound. >> if you own a house that's increased in value, it's great new, or you're one of 47% of americans in the stock market. many are yet to feel a benefit from quantitative easing. it begs the question, what is the trillions doing. gathering dust. the lyon's share is in the reform system. excess reserves exploded from $267 billion in october 2008 to $2.2 trillion today. two-thirds of all the money created by quantitative. >> banks used the cash to improve the balance sheets. they decided to lend on to the most credit wordsy borrowers. banks don't have to lend to realise a return because the fed pays a quarter per cent interest on them. >> it probably should be stopped. >> the

power and associates. >>> inside the fed. overnor gives us the inside track on what to expect from janet yellen in 2014. and he will join us for the remainder of the show. >>> a thanksgiving travel nightmare. a major storm across most of the country causing travel headaches. but will it slow down holiday shoppers? we take a look at retailers that could be impacted. >>> plus, we talk spam, chili, and the consumsecond hour of "s box" begins right now. >>> good morning and welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick and joe kernan who is back in the hot seat. see what's going on right now. green arrows with the dow looking like it would open up over 12 points higher. s&p 500 up almost 2 points higher and the nasdaq 2 points higher, as well. let's get you through some of the morning headlines, more changes in the offing at blackber blackberry. interim ceo john chen will continue to weed out personnel and remove those he deems ineffective. that comes a day after the company replaced the

who the fed is working for the fed is working for the companies that own it and the fed the federal reserve system the united states is owned by private companies and they run it and so their fate will do what what's best for these companies and includes goldman sachs and all the big banks around the country and some institutions like general electric and those formerly also and iran and so whether the other central banks work for the fed i'm not sure but they're all working to get it that's for certain well not all of this if you listen let me point out something here because in the united states they just went through all big wrangle on raising the debt ceiling and now they go through the same thing in a few weeks time they want to raise up seventeen trillion and beyond simultaneously mark carney the new chair at the bank of england said that he's going to expand the bank of england. and see it from something around four trillion pounds to nine trillion pounds so is that obvious that that this whole debt ceiling debate united states is the off draft is going to be dumped into the bank of

more fun than the fed. one of the big themes hydrogen fuel cell vehicles and toyota getting in on the fray, an suv will be built in indiana which we love. phil lebeau with the ceo of toyota north america. >> thank you, brian. joined by jim lens. as brian said a big day out here not only for you but for all the automakers. he touched on the question of fuel cell vehicles and the development there. how close are we to seeing more of a reality across america? >> i think you're going to see it a reality in 2015, some manufacturers in 2014. our first fuel cell available to the public in '15. >> the question the fin fa structure. john -- infrastructure. jonathan browning from volkswagen said there's a socket everywhere but not a hydrogen fuel pump everywhere. let's not get ahead of ourselves when it comes to fuel cells. >> the difference is in the case of a fuel cell our fuel cell as an example can refuel in three to four minutes as opposed to hours for a plug-in. in the range on our cell somewhere around 300 mile

the fed's expansion has altered the business cycle. the market metrics we're so use to have been completely distorted. you see that because investors are buying inflated cash flows and corporations are selling short future cash flows because they're putting them into dividends. the real concern long term is something we talked about a number of times, bill and maria, is there's been no investment in real productive assets. across the united states. when you don't have -- when you have assets that are getting older and older, they're producing less and less cash. this is a problem for the long-term. it's a big problem. >> rob, what about that? i know you think this market is still cheap in terms of valuations. does it get -- does it keep moving higher if, in fact, we see rates move even lower and this expectation that unemployment marker should be lower than 6.5%? >> thanks, maria. yes, good to be with you. interesting question. look, i think the best position to be in in this market is to be a practicimatist. if you look ahead into nex

who the fed is working for the fed is working for the companies that own it and the fed the federal reserve system the united states is owned by private companies and they run it and so the fed will do what what's best for these companies and includes goldman sachs and all the big banks around the country and some institutions like general electric and this for money also and iran and so whether the other central banks work for the fed i'm not sure but they're all working together that's for certain well not all of this if you listen let me point out something here because in the united states they just went through all big wrangle on raising the debt ceiling and now they go through the same thing in a few weeks time they want to raise up seventeen trillion and beyond simultaneously mark carney the new chair at the bank of england said that he's going to expand the bank of england. and see it from something around four trillion pounds to nine trillion pounds so is the obvious that that this whole debt ceiling debate united states is the off draft is going to be dumped into the bank of aim o

the fed is the only one with the playbook capable of making up this gap. i would not be surprised to see her actually take $85 billion a month up to $90 billion, even $100 billion on the outside. >> what would that do to interest rates, do you think? >> it's hard to say. i think she's going to try to hold interest rates low. i think we'll see them through 2017, maybe even 2018 if the fed is successful in doing this. again, they're trying to engineer a recovery when in reality i'm getting increasingly concerned they're building another bubble. i'm a reluctant, reluctant bull at this point. >> what about you? >> you have to be in this market, maria. you saw what the market is doing today. it's going to continue to do that. what he can can really expect is that the s&p is trading now a little higher than average. about 15 times forward earnings. it's not that expensive. money managers are having a hard time finding out if i sell this, what am i going to buy? you have to participate. companies are borrowing money at zero and buying back their stock. we're goin

how does the economy look to the fed? on pins and needles and they want to know we're counting down to the minutes of the fed due out momentarily. "power lunch" is back in a second. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ >>> let's get you up to date on the markets which are trading in a narrow range all waiting for the fed minutes due out momentarily. we've had a narrower range in the dow than yesterday. the dow is up 15 points on the trading session. the s&p up 2.3. the nasdaq up 11. as bob pisani pointed out, quite a big move percentage wise in the higher beta names like twitter, facebook, a number of those newer ipos in case

the fed watcher calls the papers a blueprint for the fed. ting mss so for monetary policy activism. saying the policy the signals the fed could dial back the bond purchases. keeping the fed funds rate lower for longer would be the fed's carrots to go with the stick of a cut in qe. it has one supporter concerned. >> i would worry about the carrot is a lot smaller than the stick. why are you getting rid of the stick? what is the reason? is there any evidence this has had an effect? it is true one day we have to get rid of this, but a severe unemployment problem in the united states. >> fed chairman ben bernanke. they have said the fed is considering possible changes like these in its policy guidance. dagen and connell. connell: thaak you, peter, appreciate it. dagen: what does david stockman had to say about this? i know it makes you miserable. >> it is fairytale land. how could somebody in their right mind believe you have interest rates that drive the whole short end of the market at 049 years? they started it in decembe december 2008. that i

the fed can't produce jobs. >> well, you know, it's amazing. qe program, something good has happened. stocks have gone up and just over the past year, isn't it kind of an interesting mystery why we've had all of this austerity, spending cuts and big, big tax cuts this year and job growth is actually better this year than last year? i think the counterfactual is that if we would not have had the round of qe this year we very well may have slipped back into our inflation. i'm not taking any advice from anyone in the eurozone. >> your response? >> i think that ultimately the -- germany is an exception but ultimately the policy itself, 160% up in the markets. we've seen markets -- whenever the q is buying, the fed is buying, down whenever the fed is not buying. it's very important. >> that's a fundamental story. the stock investor is feeling about growth. how do you explain, having all of that austerity and it's actually faster this year than last year. >> the austerity, because we're in a recovery, we're five years removed from a crisis. you're go

chief bubble blower ben bernanke is giving way to janet yellin at the fed. many think that's reality. there's no doubt the federal reserve's policy have greatly and positively impacted this bull market, by keeping interest rates low thereby eliminating competition, you put a floor under stocks that give you outsize yields versus the miserable 0.8% rate that you get on a five-year cd as of today. the fed has turned these stocks into bond market equivalents, a huge plus. capital so cheap companies can afford to buy back their stock, much more aggressively than in past cycles which can radically inflate the earnings per share and in some cases put floors under those stocks. the fed's easy policies allow more people to buy cars, homes, consumers with decent credit can get cheap financing. that leads to more autos being built, which requires more workers to be hired. as you can see today, with the huge rally in housing stocks because yellin says she embraces the bernanke policy, home builders can put people to work and companies like home depot and sherwin william

the fed knows it has a problem. y which i do not recommend to you because they're unbelievably complicated. but if you read them, they know they have a problem and they're casting about this way and that way trying to find some solution to make that solution. and bernanke's saying, you know what, we can remain low forever. >> you were going to say it didn't work the first time back in may. at that time, earn talking about a ten-year yield and never considered the notion of taper. that's been introduced. now we're a little more willing to handle that news. i think it's fine now. but, again, they can't be that transparent because then they run the risk of people front running them and selling the long end. so they have to be a little less transparent than they want to be. >> you mean volcker-esque, a quick move nobody's expecting? >> right. like what they did in september. when they pulled the rug out of the potential shorts, i think that was slightly by design. they can't say we're tapering in march because then the m

what does it mean for the fed, for the stimulus?ant of all, what does it mean for investors like you? that is on our agenda today. three key stock story lines, growth, stealth and fear. strategic ideas for all three. this really could be the storm of the century. look at the eye of that typhoon, this

i think the fed can do little about the near term.ant to keep our focus on the intermediate to longer term. and if you look at the forecast, our forecast for, you know, 2014, 2015 really didn't change very much. >> yes. i thought we kind of missed an opportunity to make a small gesture to begin signaling that, in fact, this is a dial we can move and we can adjust it and fine tune it, if you will. but i'm worried that might be -- i think the difficulty of us doing that in september, signals may be using or thinking of qe-3 as some kind of thing that we can move around with some precision or fine tune, maybe a very difficult thing to do. >> seems to me the fed was setting a higher bar for pulling back any sort of quantitative easing. what will change, though, is the voting make-up of the fed you're not a voting member, but you will be in january. that will be enough. a different set of people voting around the table? >> i don't think that really makes that much difference. you know, the language and the nature of the discussion. buildin

the united states. forecasts dropped by 5,331,000. city fedrles plosser speaks about the economy at 9:00 eastern. reports on the open, after the close, we'll hear from applied materials and nordstrom. >>> and janet yellen faces her confirmation hearing today in front of the senate banking committee. she's expected to defend the fed's aggressive bond buying program. in her prepared remarks, yellen says the u.s. economy has come a long way since the financial crisis. but there's more work to be done. she said while unemployment has come down, it's still too high. yellen suggests the fed needs to continue supporting the economy, saying that that is the surest path to returning to a more normal approach to monetary policy. u.s. economics editor at the economist and joins us for more. greg, very good morning. always good to see you. >> good morning, ross. >> the take away from the prepared statement, greg, was the balance of records shifted back towards a march taper. is that necessarily the right way to read it? >> i don't think it is, actually, r