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American Morning

America Recovers: 'Fortune's' Andy Serwer Answers Economic Questions

Aired October 19, 2001 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: All right, Andy, we can't put off your anxiety any longer. It's time for the questions from our viewers to you.

Let's go straight to number one from Donna from Texas. She writes, "I don't understand the economy very well. If it all goes downhill, does it mean that milk and break will cost more, that it won't be available at all, or will the basics not be affected.

It's a good question.

ANDY SEWER, "FORTUNE" MAGAZINE: It is a good question, but I think you have to believe that the basics will not be effected, that we will still be able to get milk and bread in this great economy of ours.

Not to worry, I wouldn't look for prices to change very much at all. The staples are going to there. This is not the kind of thing that's going to disrupt those very basic essentials.

ZAHN: But another basic essential is for those people who have to drive to work and drive to get their kids to school and everything is the cost of gas.

SERWER: Yes, that's critical, and we saw that spike up in the beginning of the crisis. It's come down now. I really think that it's in OPEC's best interest to keep the price of gas relatively low, because they know that we may be heading in -- or we are heading into recession. And if we make the price of gas up, it'll make a recession worse, which will decrease demand for OPEC.

ZAHN: Don't understand why you're being so cautious this morning, you along with some other economists in "The Wall Street Journal" declared a recession many weeks ago, not in the traditional sense.

SERWER: Well, you know, I am going to hold off until it's officially here, but you know, let's face it.

ZAHN: Let's move on to Mark Price's question. And here's what he writes: "Being that the rates are low at the time, is this a good time to buy a home or any other major purchase, such as a car? The reason I ask is the uncertainty of the economy and possible layoffs in the future."

Big concern of many, many people.

SERWER: That is a good question. And what you have to do is look at your individual situation, because it is a good time to buy a house or a car, because rates are low, but you have to look at your own situation, especially your job security. You know, we are seeing so many layoffs right now, Paula -- Bell South, Sprint, Merrill Lynch. I mean, if your job's secure, and you don't every really know, but if you feel your job is secure and you need to go out and get a home or a car, great time to do it, because car, zero financing right now with cars, giving them away basically, free money, and interest rates, mortgage rates are very, very low.

ZAHN: All right, let's move on to Gary Rogness' question. He is from Verona, Wisconsin. He writes: "The money printing press has been running non-stop since September 11th, and this is just the beginning. What are the long-term affects of this for the average American?"

Well Gary must know something I don't know about this is just the beginning, but of course we don't actually print more money. I mean, this is -- people think when they increase the money supply. It's a very complicated thing we don't want to get into. But there is more money out there, but not actual dollar bills. It's actually a really positive thing for the economy, of course, Paula, because it means that people can borrow more easily. It means that the banking system is liquid and people can get their loans and companies can pay each other off, so it's a very positive thing, and it's something Alan Greenspan looks at carefully.

ZAHN: All right, Jim Griffin has this question for you. He is from Fort Lauderdale, Florida. A nice representation of folks from all over the country. You have a fan in Fort Lauderdale, Florida here, Andy.

He writes, "Obviously, the government can push down short-term rates. What can the government do to push down further long-term rates which are set by the bond markets?"

SERWER: Oh, very good question, sophisticated question from Florida.

And it's something that vexes Alan Greenspan, because the Fed fund's rate is the short-term rate, and we've seen mortgage rates stay high relatively. And really what you have to do here is jawbone, if you are the head of the Federal Reserve or the president, and just say, that we are going to things out, and we are going to help this economy grow, but we're not reinflate the economy, we are not going to have inflation come back, and that's what makes long-term rates stay high, is the fear of inflation in the future, and people still believe the economy is so resilient and will recover so well that long-term rates still are a little bit high.

ZAHN: This question from the nation's heartland, a fan in Michigan, Andy. This one from L. Johnson. "During these troubled times, do you advise keeping some cash at home?" SERWER: You know, that is a good one. Actually my wife talking about that the other day, saying, shouldn't we have a little money in the mattress, literally, and, you know, you want to say that's crazy, you're foolish to do that, you have to believe in the system, the banks aren't going there, the ATMs will be there; but you know, if it makes you feel a little bit better to keep couple more hundred dollars at home than you would ordinarily, go ahead and do it. You know, it's not going to kill you, it's not going to break the bank, it's not going to not break the banking system if you want to keep a little bit more cash at home. If it makes you feel good, do it.

ZAHN: Just don't tell your kids it's sitting there, they might go off and spend it.

SERWER: Extra allowance.

ZAHN: Yes, exactly.

Allowances, that's subject of debate in our household. Did you get an allowance growing up? I never did.

SERWER: I did, but I had to do chores,

ZAHN: Yes, but you did that for your room and board.

Parents fed you right and they clothed you, so the least you could do in return was make your bed, and vacuum and dust and all that stuff.

SERWER: Take the trash out.

ZAHN: All right, Andy, see you Monday when the markets opens. I hope the market performs a little bit better than it did yesterday.

SERWER: Absolutely, Paula. Have a good one.

ZAHN: You, too.

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