Ben Bernanke on the Economy
BALDWIN: Two big breaking stories right now, stories about the economy. We have the G-20 summit about to commence in France. The big news there, French President Nicolas Sarkozy and Germany's chancellor, Angela Merkel, both taking place in this emergency meeting right now before that summit even begins. An emergency meeting on the chaos engulfing Greece. So stand by for more on that. But because we have -- here he is, taking questions right now -- Ben Bernanke, often described as the second most powerful man in Washington, taking questions right now. In fact, he was just asked a question about the crisis in Europe and also the Republican candidates -- I'm sorry, say that again, Angie? About Republican candidates criticizing fed policy. Let me just go ahead and bring in Ali Velshi, who is standing by in France. Ali, have you have been listening at all to Ben Bernanke. Translate this for us. What's he saying?</s>ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, first of all there -- Brooke, good to see you. The outline of the statement that the Fed puts out every six weeks when they have their meeting, no particular change. Here is what they said, that basically the economy has sped up a little bit in the third quarter, and they expect moderate growth going forward, but it's not going to do much for unemployment. They said inflation is probably moderated, as you have seen, obviously. Gas prices, having come down because oil prices have come down. But no real news. Interest rates are very low. They're between zero and a quarter percent. These are Fed rates, which means the prime rate, which banks charge their best customers, is three percentage points higher. That hasn't changed. They're not changing interest rates. In fact, Ben Bernanke has reiterated that interest rates will stay this low probably to the middle of 2013. So that's all stuff we probably expected to hear, and he is just reiterating this now.</s>BALDWIN: OK.</s>VELSHI: Remember, Brooke, we used to have just statements from the Fed. In fact, when I started covering the Fed, you didn't even get statements. You had to look at the bond market to see what the Fed had done. Now they give these press conferences in an effort to be more transparent. But here is the thing. The issue right now is not so much what the Fed is doing and U.S. policy, it's what's going on in Europe. We had what we thought was an ironclad deal worked out last week, and now we have heard that the Greek prime minister yesterday decided that he is going to take this to a referendum, which is why there is now an emergency meeting today ahead of the G-20. It's overshadowed the G-20 entirely. This meeting between Sarkozy of France, Merkel of Germany, and Papandreou of Greece is taking place in an hour from now. And I have to tell you, I would love to be a fly on the wall for that one, because I think there are going to be curse words used in there.</s>BALDWIN: Merkel and Sarkozy.</s>VELSHI: Merkel and Sarkozy and a whole bunch of people are really mad at what the Greeks are doing now.</s>BALDWIN: Hang on, because I do want to talk Greece, but first, let me bring you back to Charles Evans, who sits on the Board of Governors, broke ranks today in favor of stronger action to boost the economy -- we're talking about our economy. What do we make of that?</s>VELSHI: Well, look, it's a board, and they're -- it's not irregular for somebody on the Federal Reserve Board to vote against the others. Historically, there's always been one or two who take a different position, and that's good, right? You don't want everybody necessarily thinking the same way. But here is the same problem. Think of the Fed as a car that has just brakes and just a gas pedal. That's all it has. It doesn't have a steering wheel, it can't really slow down and speed up. It can hit the brakes or can hit the gas. The way you hit the gas is you lower interest rates. It makes money cheaper and people borrow more. When they borrow more, they spend more. That creates demand, demand creates jobs, and that's how you goose the economy. If the economy is growing too fast, you raise interest rates -- that would be the brakes -- and you slow everything down. It makes it harder to borrow money, more expensive. People stop spending, they start saving, and the economy slows down. Interest rates are at zero. There is no gas to apply. The Fed is a toolbox with one tool in it, and there is nothing more they can do. So I wouldn't put too much into the dissent on the Federal Reserve Board. They don't have a lot more tools. With interest rates at zero, you've got to do something else to goose the economy.</s>BALDWIN: OK. Back to Greece and those curse words of which you spoke a moment ago. But from the Greek perspective -- and the whole deal would forgive much of Greece's debt, but a lot of people in Greece seem to feel that they have had surrendered their sovereignty, that they are taking matching orders. You know, you mentioned Sarkozy and Merkel.</s>VELSHI: Right.</s>BALDWIN: So is that why the debt deal might be collapsing?</s>VELSHI: Right. So the rest of the world looks at the Greece and said, what are you people complaining about? They have put together this whole deal that is basically going to bail you out for decades of living beyond your means and overspending and all of this, and we're going to help you get on track. If you're Greek, you're sitting here saying, "I don't work that many hours, I don't pay that much in taxes, I retire really early, I get lots of holidays and I get lots of government services. You're going to take all of this away it is going to slow the economy down, because that's what happens when the government stops spending in the economy and I got to do this to save the rest of Europe? Why is this my problem?" So, the Greeks are sitting here saying this maybe a fantastic deal for Europe and the rest of the world, not so fantastic for us. But without this deal, without Greece doing what it has to do and you saw, we have watched riot notice streets of Athens for a year, it may not get done and Europe continues to be in big trouble. So, real difference of opinion here and it is unclear if this referendum gets held, probably in December. Whether it will pass or not, whether the Greeks will say, "We want this bailout deal, let's move ahead" or whether they have got go back to the drawing board, and with our economy in the U.S., you know, very close to not solid, it is a blow that the world may not be able to afford, Brooke.</s>BALDWIN: OK. One more question, though, I just had to get this in. We were sort of fascinated by Nicolas Sarkozy, now is he hosting this summit, taking the lead on Greece, remember, he took the lead in Libya, age 56, first-time father with his gorgeous, you know, fashion model wife, Carla Bruni. How does this man do it?</s>VELSHI: Yes. First-time in -- ever that a baby has been born to a sitting president of France. He is definitely come onto the stage as a remarkable world leader, as a guy who has really taken the lead, taken strong positions. There have been others, if you remember, with the Dominique Strauss-Kahn scandal, there were a lot of people who thought the socialists would take the office from him and Dominique Strauss-Kahn would become president. So, he does have his detractors and things have gone wrong. But as an economic world leader, he is definitely taking the stand -- taking a big stand on the world. Remember, that France and Germany are the two strongest economies on continental Europe. So, they are most concerned about this. And you'll see a lot of pictures of him walking alongside Angela Merkel. These two have really taken a hard line on this. And I think tonight's meeting at 3:30, I haven't decided whether Angela Merkel is going to hold Papandreou while Sarkozy takes shots at him or the other way around -- whether Sarkozy is going to hold him and Merkel is going to take shots at him had. But the two are fuming mad. Even the diplomatic language about how furious they are sounds furious. Normally diplomatic language tones it down a little bit.</s>BALDWIN: Yes?</s>VELSHI: But Sarkozy is definitely a force to be reckoned with.</s>BALDWIN: To be a fly on the wall, as you say. You are looking good out there, Ali Velshi, in Cannes, France, with your out of office reply.</s>VELSHI: You know, tougher gigs, Brooke, being in the south of France.</s>BALDWIN: Wonderful talking to you, my friend. Thank you so much. We'll check in possibly tomorrow with you.</s>VELSHI: As always.</s>BALDWIN: Meantime, explosives, biotoxins and ricin, silencers for machine guns, all were going to be reportedly used by four little militia members on this attack on Americans and even some government officials. And get this -- these men were in their 60s and 70s.</s>UNIDENTIFIED MALE: You never think a small town would have something like this going on around it.</s>UNIDENTIFIED FEMALE: This wasn't just talk. They took real steps toward carrying out their plans.</s>UNIDENTIFIED FEMALE: I feel unsafe, you know, because if they are coming this close --</s>BALDWIN: You may not believe what their motive was. Those details coming up two minutes away. Stay right here.