ADAM: I THINK I AM MORE UP TO DATE.
I TO GO TO CHARLES PAYNE,
BEST-SELLING AUTHOR AND
ALL-AROUND GREAT PERSON.
WE’VE KNOWN EACH OTHER FOR
DECADES AND BOTH SURVIVED THAT. LET ME GET YOUR TAKE ON THE
LET ME GET YOUR TAKE ON THE
EMPLOYMENT REPORT THAT SEALS
THE DEAL FOR RATE HIKES
CHARLES: HOW DO THEY LOWER
THEIR BALANCE SHEET?
A LOT OF PEOPLE LEARNED THE
TERM QUANTITATIVE EASING.
THE QUESTION IS QUANTITATIVE
TIGHTENING AND THAT IS WHERE
YOU’LL SEE THE MARKET GRAPPLE
WITH A LOT OF THINGS IN THE SAN FRANCISCO FED SAYING HIKE A
FRANCISCO FED SAYING HIKE A
COUPLE TIMES AND THEN ASSETS
THAT NORMALLY EXPIRE AND LET
THEM RUN OFF THE BALANCE SHEET
AND WALL STREET IS GETTING A
LITTLE BIT OF ANXIETY.
LAST TIME THEY STARTED HIKING
THEY WENT TO A TIGHTENING
REGIME THAT TOOK TWO YEARS TO
LET THE BALANCE SHEET RUNOFF
AND THEY WILL DO A LOT SOONER
AND THEY ARE NOT SURE WHAT TO
MAKE OF THAT AND THE KNEE-JERK
REACTION IS TAKE A MORE CAUTIONARY ACTION WITH RESPECT
CAUTIONARY ACTION WITH RESPECT
TO STOCKS.
NEIL: I ALSO WONDER ABOUT THE
IDEA THAT THE FED WILL ALMOST
ALWAYS FIND AN EXCUSE NOT TO DO
THE TOUGH THING, RAISE RATES,
MORE AGGRESSIVELY TAPER AND ALL
THAT.
THEY MIGHT RESORT TO WHAT
THEY’VE DONE SEVERAL TIMES
BEFORE AND GO BACK TO PRINTING
MONEY.
NEIL:
CHARLES: IT IS INEVITABLE, LIKE
DOCTOR FRANKENSTEIN HE CREATED
SOMETHING.
ARE ASSETS IN THIS COUNTRY ARE
5.6 TIMES GDP AND IT IS
MIND-BOGGLING.
IT IS ENORMOUS AND YOU CANNOT
DISMANTLE THAT OR TRY TO TINKER
WITH IT.
THE WEALTH EFFECT WHICH THAT
REFLECTED THE FEDERAL
GOVERNMENT APPROACHING
$30 TRILLION SO DO YOU WANT TO
MAKE IS WHERE WE ARE SPENDING
$1 TRILLION ON INTEREST?
I WAS LISTENING TO PRESIDENT
BIDEN BEFORE I GOT WIRED UP AND
HE ACTUALLY MENTIONED THE FED
TODAY.
I FELT LIKE IT WAS SORT OF A NUDGE.
HE TALKED ABOUT THE MANDATES,
THE FEDERAL RESERVE, GOT TO
TAKE CARE OF EMPLOYMENT AND
INFLATION BUT WE ALSO -- HE IS
WORRIED ABOUT TAKE AWAY THE
PUNCH BOWL BECAUSE ALMOST
EVERYTHING HE BRAGS ABOUT TODAY
WAS A RESULT OF ARTIFICIAL
MONEY.
THE FED PRINTING MONEY OUT OF
THIN AIR OR ALL THE FISCAL
PROGRAMS INCLUDING THE LAST
$2 TRILLION DEAL FROM THE
PRESIDENT.
YOU TAKE AWAY ACCOMMODATION AND
ALL BETS ARE OFF.
WE ARE SO DEPENDENT ON
ARTIFICIAL MONEY PUMPING US UP
THAT A LOT OF FOLKS WONDER IF
WE CAN DO IT ON OUR OWN AND THE
STOCK MARKET IS TELLING YOU WE
CAN’T.
THE FED CAN MAKE SOME
ADJUSTMENTS FOR INFLATION BUT
CANNOT GO TOO FAR.
A LOT OF PEOPLE PREDICTING, I
WILL NOT BE SURPRISED, DON’T BE SURPRISED IF SOMEWHERE MIDYEAR
SURPRISED IF SOMEWHERE MIDYEAR
YOU SEE THE FED REVERSE COURSE.
NEIL: SEEMS TO ME THEY ARE
FOLLOWING THE MARKET, I AM
TALKING THE STOCK MARKET AND IF
THE STOCK MARKET GOES INTO
FREEFALL THEY WILL DO AN ABOUT-FACE.
WILL THAT BE THE CATALYST?
"CAVUTO COAST TO COAST"
CHARLES: I SAW STOCK MARKET AND
EQUITY MARKETS, THEY ARE
WATCHING THESE MARKETS LIKE A
HAWK.
THEY KNOW THEY NEED THE WEALTH
EFFECT, EVEN IF YOU’RE NOT IN
THE MARKET, WHEN THE MARKET IS
AT AN ALL-TIME HIGH EVEN PEOPLE
WHO ARE NOT DIRECTLY, I TOLD
EVERYONE EVERYONE WATCHING THE
SHOW, IF YOU ARE WATCHING THE
SHOW YOU ARE DIRECTLY OR
INDIRECTLY IN THE MARKET.
THEY KNOW JUST HEARING THE
MARKET IS DOWN 20% PEOPLE PULL
BACK AND THAT HAVE A
PSYCHOLOGICAL IMPACT ON THE
ECONOMY THAT THEY UNDERSTAND.
IT IS VERY REAL AND THEY CREATE
THIS MONSTER, THEY CAN ONLY
TEAM IT FROM TIME TO TIME BUT CANNOT BE CONSTRUCTIVE.
CANNOT BE CONSTRUCTIVE.
THE LAST BENEFIT THAT HAD THOSE
NERVES, PAUL VOLCKER, WE HAD
SERIOUS PAIN IN THOSE DAYS.
CAN YOU IMAGINE PEOPLE HAVING
TO PAY 20% OR 18% INTEREST TO
BUY A HOUSE, THE KIND OF PAIN
WE TOOK AND ACCEPTED BETWEEN
PAUL VOLCKER AND RONALD REAGAN
THAT FIRST YEAR WAS UGLY.
IT WAS DEVASTATING BUT THAT IS
WHAT THEY HAD TO DO TO GET US
ON A GLIDE PATH TO MANY YEARS
OF PROSPERITY.
NEIL: I AM WAY TOO YOUNG TO
REMEMBER THAT BUT YOU ARE
RIGHT.
I REMEMBER MOST OF IT.
A FULL POINT RATE HIKE HAD TIME TO SLAP DOWN THIS INFLATION.
TO SLAP DOWN THIS INFLATION.
IT WAS PAINFUL AND THE TREK.
CHARLES: CAN WE ENDURE THAT
KIND OF PAIN THESE DAYS?
DON’T KNOW OF ANY BENEFITS.