A Look at Possible Quantitative Easing Policy
ROMANS: Welcome back to YOUR MONEY. Peter Morici is back with us. Joining us now Carmen Wong Ulrich, personal finance expert. Thanks, both of you. Quantitative easing. Peter, it's the move many folks expect the Federal Reserve to make to jump start the economy. It sounds complicated, it's not really. It's simply the government buying stuff, buying assets, things like bonds, T-bills, mortgages; it pumps money into the economy. It's why it's believed the Fed is going to turn to another round of quantitative easing in the next month. Peter, the market is above 11,000 is this due to anticipation of this quantitative easing? I can't hardly say it or expectations maybe of a big Republican win in November? Or is it something else?</s>MORICI: Well, I think the very strong profitability American companies have enjoyed by cutting their costs and also expanding in Asia is an important factor. But the anticipation of a Republican victory, I think is having a lot to do with stocks because the business community has soured on the Obama administration rightly or wrongly they have. I don't think that quantitative easing is expected to accomplish a lot. I recently participated in a poll of forecasters over 90 percent of us, you know, anticipate qe-2 to go out of the docks, you know, on November 4th. But we're not expecting to travel very fast or accomplish very much.</s>ROMANS: You're expecting the SS Minnow not some big luxury --</s>MORICI: Why exactly, I guess, a little boat in my bathtub is going to leave.</s>CARMEN WONG ULRICH, PERSONAL FINANCE EXPERT: I think consumers are a little afraid of the qe-2 docking. Because what they're afraid of and what I'm hearing is inflation. We see big prices are going up, for example, McDonald's. That's not even related. We're going to see prices of things that are really essential to people's lives, when they go to the grocery store or such. Remember what happened when gas went so, so high. Consumers are really struggling right now and especially in terms of confidence. It's going to be really hard for them to feel any better when they have to stretch their dollar.</s>ROMANS: So glad you brought that up, because you have meat prices that are the highest, you know, certainly since I was a little girl. You've got a big, big rally in grain prices earlier this summer. The fastest pace in grain prices rising in like 40 years or something. Peter, what's going on out there really?</s>MORICI: Well, with food prices, there's a drought in the southern Midwest and so forth, which is driving up the cost of keeping livestock. All the growth in China is driving up commodity prices, oil. You know, every time a job leaves the U.S., Midwest for China, world oil consumption goes up because the Chinese make things so much less efficiently when it comes to energy use. And someone moves from the country in China into the city and becomes a consumer of air- conditioning.</s>ROMANS: You draw this real direct link between what's happening in the U.S./China relationship to what I'm paying at the grocery store. And I wonder if that's going to be a theme that will continue as we head into next year. Because certainly these commodity rallies. They certainly beg some attention, don't you think?</s>MORICI: Absolutely. And you know, China's set a goal of a leader of every child, they can't produce that themselves. They import it from Germany and Europe, well, they feed those cows grain. As their incomes go up, it happens.</s>ROMANS: I want to; Carmen Wong Ulrich is a personal finance expert and author, so I really want to get her point of view on this particular story coming up here. Changes coming to the 401(k) statement. It could help you save money. Starting in 2012, the Labor Department's going to require that 401(k) plan providers clearly, clearly state all fees and expenses deducted from a saver's retirement account. The goal is for you to know exactly what you're paying to invest your nest egg without a lot of digging. And the Labor Department says you'll be able to shop around for lower fees. Is this a good idea, Carmen?</s>WONG ULRICH: This is a very good idea to a point. What I'm really concerned about is, of course, we want to see all of those fees. A lot of Americans didn't even know that they were paying fees on their 401(k) s. Because they say well I checked no load so why am I paying a fee? But there are a bunch of other fees you could be charged, administrative, legal, such as that. So it is great to see them. What I'm concerned about is I constantly hear from people who are very confused period about how to choose things in their 401(k). Now we've got to give them another set of charts and documents to get them to help choose what they need to put their money in. It's going to be very, very confusing. What I really hope is that employers take some time and effort to basically help employees through this process and explain to them -- they're supposed to be very easy to read, charts. We know some people just can't read charts. To explain how this works and how there really needs to be a triumphant when you are investing, it's got to be about taxes, fees, and returns, not just about returns.</s>ROMANS: Do you think it'll make the mutual fund companies more competitive in their fees if its right out there in the open where we can all see it that maybe it's going to be good for consumers?</s>WONG ULRICH: It should. We absolutely hope so. It really, really should. It really is going to be a shift about people where they're choosing to put their money. We know about 80 percent of folks do choose no load fees to put their money in. So a lot of folks are paying attention. If we see a big shift here, we are going to see more competitive pricing.</s>ROMANS: Peter, I'm a little bit of a cynic. It's going to take a whole other year and two months before any of us are going to see these changes. It always takes such a long time, Peter. We give them an awful lot of time to cope and strategize with the new rules, don't we?</s>MORICI: Well, sure. The Fed does move slowly. The federal agencies that deal with these things move slowly. But remember, people have a lot of money in these accounts and they can roll over all that money, not just the money they put in two years from now, but the money they have already put in. And very often the choices that folks have from their employees are not the best of choices. And they can roll them over into very low-fee options that are available from companies like, you know, Fidelity, Vanguard and so forth, USAA is a marvelous company. They can roll them over and knowledge of these fees, economists like this kind of information. Transparency is good.</s>ROMANS: All right, Peter Morici thanks so much. And Carmen Wong Ulrich. A trend in the way you get your news. Why the home delivery of your local newspaper could soon go the way of the typewriter.