Vin Weber Discusses U.S. Economy
MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields with Al Hunt, Robert Novak and Margaret Carlson. Our guest is former Republican Congressman Vin Weber of Minnesota. It's good to have you back, Vin.</s>VIN WEBER, FORMER CONGRESSMAN: It's great to be here, and I'm especially happy because I know Bob Novak had to leave his Earth Day activities to be with us.</s>SHIELDS: It isn't easy being green, Bob. Federal Reserve Chairman Alan Greenspan surprised and delighted markets in-between its regular meetings. The Federal Open Market Committee dropped short- term interest rates by 1/2 percentage point, or 50 basis points, and stock prices rebounded from a slump. The Fed statement said, quote: "The risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future," end quote.</s>ROGER FERGUSON, VICE CHAIRMAN, FEDERAL RESERVE: The downward revisions to earnings expectations have hit the stock market hard since last fall, and declines in equity wealth could begin to show through more forcefully to consumption spending. All in all, I think it is too early to have a strong conviction that the economy is reaching the end of this period of quite slow growth.</s>SHIELDS: Bob Novak, well, it turned out that Alan Greenspan has triggered a new burst of economic growth.</s>ROBERT NOVAK, "CHICAGO SUN-TIMES": Unfortunately not, and Governor Ferguson had it right. He said that things are tough. We are in a bad economic situation, no little because the Fed was behind the curve. They were seeing the inflation behind every door when there wasn't any, and the Wizard of Oz behind the curtain, Dr. Greenspan, was making a lot of mistakes. The worst thing about the Greenspan standard is everybody agrees he should have eased, even this time, a little earlier, but he didn't because the central banks don't ease when the markets are going down. They only ease when they're going up a little bit. It's a lot of hokum and nonsense, and we ought to stop giving him a free ride on bad policy.</s>SHIELDS: Was it a bad idea to cut it...</s>NOVAK: You didn't listen to what I said.</s>SHIELDS: I know!</s>NOVAK: He should have done it -- but...</s>NOVAK: And he shouldn't have tightened for all those weeks when there was no inflation.</s>SHIELDS: Vin.</s>WEBER: Well, I largely agree with Bob. I think...</s>SHIELDS: That's it!</s>WEBER: I think this action is appropriate, but I do agree that Alan Greenspan waited too long. I think the real question that policy makers have to think about is not just, are we into a recession here, but are we really in the middle of a global deflation, anything like that. You know, Japan is in trouble, a lot of countries in South America, like Argentina are in trouble, still got relatively slow growth in Europe, and of course our country is right on -- teetering on the edge of recession. If indeed, we are in anything approaching a global deflation, then Bob is absolutely right. The Fed didn't act soon enough, or they didn't act strong enough. And nor have the Federal -- the equivalents of the Federal Reserve in Europe and other parts of the world.</s>SHIELDS: Now, Al Hunt, the confidence index is coming back. I mean, I see polls of people in business, business executives, unlike our commentators and analysts here, who say that they are actually bullish and optimistic about the future. And I've just heard</s>AL HUNT, "WALL STREET JOURNAL": You know, we've tried so hard to educate Bob. Bob, you ought to read "The Economist." This will explain to you.</s>NOVAK: A lefty...</s>HUNT: If you think "The Economist" is a lefty publication, you're -- that's where you're coming from.</s>NOVAK: That's right.</s>HUNT: ... but the more problematic thing is some of these chicken littles -- I won't mention any names -- four or five months ago said, by April and May things are going to terrible, Mark. They said it was just going to be awful, and Greenspan made a huge mistake by not cutting those rates back in November and December. And I know you've been away for a while, so you kind of missed on what's been going on. I think actually Greenspan is managing this thing quite well. We are not in any kind of a terrible recession, as those people predicted four months ago. In fact, the market has gone down some, so there's clearly some weakness, but it's quite a mixed picture. Companies like IBM, and Apple, and Microsoft had very good profit reports this week -- and most importantly, AOL. But I think there are also some other -- there are some alarming things. I mean, the huge, hot stock of a year ago, Cisco -- the company was supposed to be so big, had a terrible week, and I think Greenspan is responding appropriately, Bob.</s>SHIELDS: Margaret, who is right here?</s>MARGARET CARLSON, "TIME" MAGAZINE: Well, you know, Greenspan bided his time and then he surprised the market and created what I think is some rational exuberance in that the market went up. What Ferguson said was he wasn't worried about the economy overall, he is worried about a decline of, quote, "equity wealth," which is exactly what you're worried about, Bob.</s>NOVAK: That isn't what he said. That isn't what he said.</s>CARLSON: He said precisely "equity wealth."</s>NOVAK: No, he said...</s>CARLSON: .. which is the sense that people in the market have lost this euphoria they had about incredible gains over the last decade.</s>NOVAK: Can I, Margaret, just tell you what he said.</s>CARLSON: The average person haven't made...</s>NOVAK: Just let me intervene for one second, please.</s>CARLSON: OK, I will, Bob.</s>NOVAK: All right.</s>CARLSON: Now, you remember, next time, I would like to interrupt.</s>NOVAK: Yes, I just want to say what he said was that the tremendous loss in equity wealth, and it looks like it my impinge on the real economy. That's what he said.</s>WEBER: I get, Margaret -- if I can have my say -- I get a little tired of people sneering at the stock portfolios. For the average person getting ready to retire in the next year or so, maybe got a kid ready to go to college, equity wealth is the economy. And to say that that doesn't matter to us, that all these people that have been depending -- 60 percent of American households now invested in the stock market in one mechanism or another -- that we don't care about it because that's just the stock market...</s>CARLSON: No.</s>WEBER: ... is denying what the real economy is.</s>CARLSON: Many households are, but the bulk of stocks are in the hands of a very few people, and the average family hasn't benefited over the last decade from this boom.</s>HUNT: Let me just tell you something. You are a lot smarter than I am. You know what, markets do two things. They go up and they go down, and I'm sorry, you're not going to be able to change that. But I must say, Bob -- Bob, you have potential for growth. Because I'm so pleased that you praise Governor Ferguson, because you had quite a different view of him several weeks ago...</s>NOVAK: I just...</s>HUNT: ... and I want to tell you, I'm just so glad that you quoted him glowingly. That shows you can grow.</s>NOVAK: I just tried to quote him correctly, because Margaret got it wrong. Let me just say this, that Vin said something very, very important that most of you probably didn't understand, and that is there is a global deflation going on, it's very dangerous, and there's one way to fix it immediately...</s>SHIELDS: What is that, Bob?</s>NOVAK: ... and that is to fix the price of gold.</s>SHIELDS: Oh, boy!</s>NOVAK: If the price of gold were to be fixed, you would immediately have a rise in prices around the world and an increase in equity wealth.</s>HUNT: Vin, you ought to get a presidential candidate to run on that. Don't you think that would be exciting? Don't you think that?</s>SHIELDS: ... let's just ask one question, don't you think -- follow on Margaret's point -- don't you think so much of the stock market thing was people buying stocks, rather than investing in companies? I mean, they were buying -- Al makes the point about...</s>CARLSON: Yahoo!</s>SHIELDS: Cisco and Yahoo! I mean, people didn't know what they did, or anything of the sort. And it turns out that Cisco had short of a shell game going.</s>NOVAK: That's so ridiculous, Mark.</s>SHIELDS: It's accurate.</s>NOVAK: The idea that if you put in a stock and hope it will go up, you're making a bad -- instead of investing in a company, that sounds like a socialist would say that. And you're not a socialist.</s>SHIELDS: Thank you so much, Robert.</s>HUNT: Those are the sort of people who invest in sometimes Lloyd's of London.</s>SHIELDS: Oh no, I don't know anybody that silly. CAPITAL GANG will be back with fruitless U.S.-Chinese talks.