NASDAQ TURNED AROUND.
MANY TECH STOCKS ARE LOWER.
WE'RE WATCHING INTEREST RATES,
WE'RE UP TO 3.10, THAT IS UP A
COUPLE BASIS POINTS TODAY.
WHILE WE TALK INTEREST RATES,
LET'S BRING IN FORMER BB&T
EXECUTIVE OFFICER JOHN ALLISON.
GOOD TO SEE YOU.
THE THOUGHT WHAT RISING INTEREST
RATES REALLY MEAN.
WE TALK ABOUT IT IN THE CONTEXT
OF STOCK MARKET.
PEOPLE SAY WE'RE IN TROUBLE,
THAT IS WHY WE WERE IN TROUBLE
THE LAST COUPLE WEEKS.
WHAT IS YOUR GENERAL IMPRESSION
BEFORE WE DIG INTO IT, RISING
INTEREST RATE ENVIRONMENT WE'RE
IN?
>> GOOD AFTERNOON.
I THINK THE MARKET AND THE
ECONOMY, TO SOME DEGREE LARGELY
DISCOUNTED INTEREST RATE RISES
THAT THE FED ANTICIPATES MAKING.
THE REAL ISSUE WILL THE RATES
RISE HIGHER OR FASTER THAN
PEOPLE EXPECT?
I THINK LONG-TERM CHALLENGE, NOT
THAT LONG TERM, RISING INTEREST
RATES WILL RAISE GOVERNMENT
DEFICITS AND COULD RAISE THEM
MATERIALLY.
THE U.S. GOVERNMENT IS THE
WORLD'S LARGEST DEBTOR.
YOU COULD HAVE 3, TO
500 BILLION-DOLLAR INCREASE IN
DEFICITS THAT WILL RATTLE
MARKETS AND IMPACT THE ECONOMY.
SHORT TERM I DON'T SEE IMPACT
BEING MUCH DIFFERENT THAN WE'VE
ALREADY SEEN.
LONGER TERM, IT IS A CHALLENGE.
CONNELL: COUPLE THINGS THERE.
GET INTO THE PRESIDENT'S
CRITICISM OF THE FEDERAL
RESERVE, WHAT THAT HAS MEANT.
HOW THE FEDERAL RESERVE WILL
REACT NOT ONLY TO THAT BUT THE
DATA LAST WEEK.
THE FOLLOW UP ON THE DEFICIT
POINT, JOHN, WHAT IS THE TIME
TERRIBLE OF WORRY ON THAT?
WHEN DO YOU THINK RED FLAGS, RED
LIGHTS START FLASHING ON THE
DEFICIT ISSUE IF THEY HAVEN'T
ALREADY?
>> WELL, FOR ME THEY HAVE BEEN
FLASHING FOR SEVERAL YEARS.
CONNELL: I FIGURED.
>> I'M NOT SURE WHY THE
MARKET --
CONNELL: YEP.
>> YEAH, I WOULD GUESS WITHIN
THE NEXT YEAR WE START SEEING
ACTUAL NUMBERS AND RATES GET
HIGHER AND STAY HIGHER, IT WILL
BE HARD FOR THE MARKET OR THE
ECONOMY TO IGNORE THE
IMPLICATION OF A MUCH MORE
EXPENSIVE LEVEL OF DEBT IN THE
U.S. ECONOMY.
CONNELL: OVER THE NEXT YEAR.
YOU'RE RIGHT.
YOUR GUESS IS AS GOD AS ANYBODY.
PEOPLE THAT HAVE YOUR POINT OF
VIEW, SOMEBODY SHOULD HAVE BEEN
THINKING ABOUT THIS YEARS AGO AS
OPPOSED TO A YEAR OR TWO DOWN
THE ROAD.
YOU'RE ABSOLUTELY RIGHT ABOUT
THAT.
ASK BUT THE FEDERAL RESERVE
REACTION THAT PLAYS INTO ALL OF
THIS.
THERE ARE A COUPLE SCHOOLS OF
THOUGHT.
PRESIDENT WENT AFTER JAY POWELL,
CRITICAL OF THE INCREASE.
LAST WEEK SOME PEOPLE SAID YOU
KNOW WHAT?
, JAY POWELL IF ANYTHING REACTS
TO THAT I WILL KEEP RAISING
RATES, WON'T SAY THIS OBVIOUSLY
BUT I HAVE TO PROVE IN MY MIND
OF THE FEDERAL RESERVE AND THIS
FEDERAL OPEN MARKET COMMITTEE IS
INDEPENDENT FROM CRITICISM FROM
THE PRESIDENT AND ANYBODY ELSE.
THE PRESIDENT'S CRITICISM MIGHT
HAVE OPPOSITE WHAT YOU WOULD
THINK WOULD BE DESIRED EFFECT.
OTHERS SAY IN THE DATA, YOU CAN
FIND REASONS THE FED WILL SLOW
DOWN, NOT BE AS AGGRESSIVE.
WHAT DO YOU THINK WILL HAPPEN?
>> I THINK THE PRESIDENT'S
COMMENTS WILL HAVE BASICALLY NO
IMPACT.
I THINK THE FEDERAL RESERVE WILL
GO BY THEIR OWN MODELS.
AND SO I DON'T THINK THAT HIS
COMMENTS WILL MATTER.
THE FEDERAL RESERVE IS POLITICAL
ORGANIZATION IN LONG-TERM
CONTEXT.
THEY HAVE TO BE APPROVED BY
PRESIDENT AND CONGRESS.
YOU HAVE A LOT OF POLITICS BUT
NOT SOME REACTION TO IMMEDIATE
COMMENTS.
WHAT IS REALLY INTERESTING,
THERE ARE A LOT OF ECONOMISTS
FOCUS NOT JUST ON INTEREST
RATES, BUT WHAT IS CALL NOMINAL
GROSS DOMESTIC PRODUCT AND GDP.
THE NGDP THE FED HAS BEEN VERY
ACCOMMODATIVE AND MORE
ACCOMMODATIVE THAN IT WAS DURING
THE ECONOMIC CORRECTION.
SO ONE OF THE INTERESTING
ISSUES, ARE THEY ALREADY BEING
ACCOMMODATIVE?
WHAT THEY NEED TO DO IS, IS
RAISE RATES AND ACTUALLY SLOW
THE GROWTH OF THE MONEY SUPPLY.
CONNELL: BE CAREFUL, JOHN, YOU
MIGHT GET YOURSELF A TWEET FOR
THAT PRETTY SOON, IF YOU'RE
ADVOCATING FOR HIGHER INTEREST
RATES.