Post date: Nov 09, 2012 3:50:46 PM
Reuters Market Access Now we have a lot of Fed officials hitting the speaking circuit next week. How are they going to frame do you think the fiscal cliff? What sort of things should we listen for when they speak?
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE:
I think part of the reason that they did announce their QE3 or QE infinity, whatever you want to call it, is to kind of preempt some of the negatives from the fiscal cliff. So I think they'll certainly want some resolution of the fiscal cliff in the short term. But also I think it's important to keep in mind by pushing off the fiscal cliff, we help the economy in the short term but we still just push off the day of reckoning. Part of the problem with having big fiscal stimulus is eventually you need to have a fiscal contraction. Who knows when a good time for that is but I think the Fed will be concerned both about the short-run economic impacts and the long-run fiscal health of the U.S.
ANCHOR QUESTION:
What potentially is this short-run economic impact? I mean, the worry is going back into recession if something is that severe.
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE:
Yeah, certainly. I mean, the economy is growing at, what, 2%. And if you have taxes go up as scheduled and spending decrease particularly on the defense side as scheduled, the U.S. could certainly go back into a technical recession. I don't think the worst of it will happen. I think eventually the can will get kicked down the proverbial road. But certainly, if everything were scheduled to happen as it's currently written law, that would not be good for the U.S. economy.
ANCHOR QUESTION :
I want to ask you too about our future economic team now that President Obama has got his second term: Tim Geithner, we don't know who's going to replace him; Ben Bernanke, eventually- any guesses for instance starting with Treasury secretary on who might be the new one?
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE:
Yeah, I think this will be a very important thing to watch. It could be someone like Jack Lew from the Administration. Also it could be someone like Erskine Bowles. And I think if you see someone like Erskine Bowles, that's very bullish because he's got his name on that deficit commission plan. He would be more for compromising and less partisan. So I think that would be good if you saw someone like him take Geithner's post at the Treasury.