tv Real Money With Ali Velshi Al Jazeera April 16, 2014 7:00pm-7:31pm EDT
craze. >> maria, appreciate it. thank you so much. >> that's all of our time for this news hour. thanks for being with us. i am tony harris in new york. always, if you like the latest on any of our stories, head on over to aljazeera.com. "real money" with ali velshi is next. the chinese economy might be slowing down but if you do business with china, you will want a piece of the action. i will tell you why. here in the united states, factories are making more, builders are building more and people like are you spending more. i have a brand-new snapshot of america's economy. little guys who do what the bankers don't, small community banks and their important place on the main streets of america. i am ali velshi. this is "real money."
♪ this is "real money." you are the most important part of the show. tell me what is on your mind by tweeting or using facebook.com/alivelshi. china's economy is slowing down from the torrid pace. if you listen to some people, you would think the sky is falling. it's not. china remains extremely attractive destination for businesses and invest whorz take a long view and want a piece of the action.ors who take a long view and want a piece of the action. we learned chinaas gross domestic product, the broadest measure of economic activity grew 7.4% in the first three months of 2014. now, this 7.4% is compared to the same period last year. >> growth is pretty good. but it's down from 7.7% which
took place in the last three months of 2013. 2-4 is the first quarter of 2013. 7.4% is the slowest growth recorded by china in 18 months. china's real estate sector is struggling. there is reduced investment in stuff like machinery and buildings. but hello! as the head of the world's biggest advertising agency told me earlier this week: countries like the united states would die for numbers like this. even approaching 7%. and no wonder. us gross domestic product is forecast to grow 2.8% this year. not bad for the united states. no where close to that. here is some perspective. we also learned that retail sales in china grew 12.2% in march, also compared to a year earlier. more than 12%. people spent more than 12% more than they did the year before. now, that's better than what economists expected and faster
than the first two months of this year. this is the kind of growth u.s. companies are chomping at the bit to tap into. check this out. by 2016, china is expected to pass the united states as the world's biggest retail market with estimated sales of $4.2 trillion, up 82% from 2012. compare that to 16% growth forecast for u.s. retail sales over the same four-year period. this is just one benefit of a chinese population that now numbers 1.4 billion people. >> that's rising wages and government efforts to increase consumer business. here is the up shot. china today is at least a $300 billion market for u.s. companies and workers. and that market is only going to grow. so, if you are an american with stuff to sell to
china, this is still a largely untapped well that is getting bigger with nothing but opportunity for years to come. so whether you are a running a big conglomerate or a small startup or looking it pick up where in the world to invest some of your portfolio, do not lose site of the bigger china picture. i am not telling you to jump in head-first. i am just telling you: china's future still looks pretty bright. let's talk more about the importance of china to the united states economy and global growth. and for that, i am joined here by steve bruscheto, the chief economist at mazuto's securities. we are talking about the american economy and the impact of this on the american economy. let's start with china as a place for americans to do business. it's growing at more than double the rate the united states is growing albeit from a lower base. we might be getting a little caught-up in all of these worries about china. >> it's a matter of per respective. we started from 10 and a half
growth. you say my god. you look at 2% in the united states, at 2.8 versus 7.2. even if it's 6.8, it's a big, big percentage difference. you are right in terms of the consumer market coming on. there are things to worry about. economies like dmooin transition, especially if they have hang-ups. people are worried more about the hiccups than the longer term investment strategy. one area is the aging of china. most don't recognize between the fact that between now and 2040, china is aging much more rapidly than the united states. >> do they have to have -- do they have problems we have, social security, the idea younger workers are supposed to support older retirees? >> they have it less through the government than they do through the family structure. look at a typical asian economy, what happens is the granted
parents tend to raise the children and the parents go out to work and then that cycle continues itself over time. so, yes, the worker does tend to be responsible for their parents as well as for their child. but it's direct rather than through the government. and that changes the nature but it's a drag as you are getting an older and older population. they have an additional problem that has to be considered. >> that's the lack of females in the chinese population, is the one child policy. >> yeah. >> you know, it's considered a detriment, people going more and more toward keeping male children. you have those problems. longer term, china is going to be a force to be reckoned with. it is the second largest economy in the world. and it will be from a dynamic standpoint. >> small business owners will benefit from the fact that the largest number of tourists going anywhere in the world but specifically america will end up being chinese and chinese are looking for investments, whether it's property or business investments in america. so, for our purposes, if you are a small business person or you
are a young person looking for more work opportunities, china still is the biggest brightest spot. >> certainly if you are looking at what you are going to do in terms of learning a second language. mandarin is the place to go. >> that's going to continue to be the same for a long time. 10 years ago people thought it was portuguese. it is mandarin primarily because of the size. it's a continent size country. the other one detriment people look at is the lack of natural resources. a lot come from overseas. again, we benefit from the lack of benefits of substantial amount of natural resources. on a relative investment strategy, we could take advantage of a lot of those opportunities. i think your point is 100% correct. that's in your view of what we should be doing. how do they take advantage of that diynamic growth rather tha worried about it? they are not concerned about the same financial concerns that the people are wal-mart are. >> wait right there. we are going to have you back
after the break. we will talk about opportunities here in america and the u.s. economy. if you have been pounding the pavement looking for a job, the new fed chair said something today with you in mind. i will tell you about that. plus, i am going to show you how community banks serve the under send in america despite a host of new obstacles. >> and more as "real money" continues. keep it right here.
the u.s. economy is shaking off the winter blues. >> that's the sunny message from the federal reserves' beige book. i have it right here. i am going to bring it over to you and show you. >> that's the message from the federal reserves beige book. this is a collection of anecdotes from the federal reserves 12 regional sdrinths, one of my favorite reads on the economy because it's about real people and businesses and less about numbers. for example -- by the way, this is just a prop.
it's not the beige book. there is nothing actually in here. in the real beige book, we learn in the chick, midwest region, steel protection returned to normal levels. food manufacturers around boston stwrulingd with a drop in demand because of the weather. overall, the feds' report suggestsrugglesw with a drop ind because of the weather. overall, the feds' report suggests in the a lot moderate hiccup from mid march through early april, particularly in regions that had been heaard hi by winter weather. there was something to the fact that the freeze was keeping everybody in indoors. consumer manufacturing increased while the outlook for housing remains a bit cloudy. today, we got data and comments from the if he had chair, herself, about this. i will get to janet yellen in a moment. first let me talk about housing. housing starts, now, these measure groundbreaking activity for new hose. they rose 2.8% in march to the fastest pace so far this year. >> that's a monthly number, monthly gain of 2.8.
permits to build houses, a barometer for future construction activity fell 2.4%, dragged down by meulti-family homes. they are apartments, how you might think of them. industrial production, i want you to see this, messuring the output of industry, mines, factories, it was un7/10ths in march. the february number -- a lot of these numbers are revised when we get the next month's number. february was revised up to 1.2%. when you take the first quarter all together, industrial production grew 4.4% in the first three months of the year compared to the same period a year ago. it's pretty impressive number. one that supports federal reserve chair janet yellen's belief that the economy is making, in her words, very meaningful progress. i went to the economic club of new york this afternoon to here her talk about what -- to hear her talk about what effect fed
policy has. it supports the economy by trying to achieve full employment and also by keeping inflation under control. the fed chief made it clear that while we are making good progress, there is room for improvement. listen to what she said: >> the housing market still has far to go. it seems to have turned the corner. it's a sign of how far the economy has come that a return to full employment is for the first time since the crisis in the medium state your name out looks like of many forecasters. we all know that there are problems in the labor market that run deeper than merely a weak economy. they are not just cyclical problems. we have seen arise in inequality and pressure on wages at the middle and below of the income spectrum, the financial crisis,
i think, left -- left us with a lot of headwinds that the economy has been struggling to overcome so we have indeed had a disappointingly slow recovery, and our consistent expectations for a pick-up in growth have been dashed a number of years. >> now, yellen said the u.s. economy is on track to hit the sweet spot by the end of 2016, reaching so-called maximum employment and price stability for the first time in nearly a decade. another way of talking about inflation which the if he had wants to be at about 2%. 2. inflation is too low. i will tell you why it's too low as a problem. it's too low to raise interest rates. let's bring steve back in. steve, i love listening to janet
yellen, the fourth fed chief i have covered and she is by far the most plain-spoken so far? >> that's right. she is the right person for the job right now. >> all right. she spent a lot of her discussion today on inflation being too low. around 1% compared to the fed's 2%. how could inflation be too low? there is low inflation if prices don't go up. >> they don't go up at the same token. retirees don't get a higher rate of interest and it's harder and harder for corporation to have top line revenue growth. at a 1% top line revenue growth number, it means there is still primarily focused on cost cutting that gets us right back to the vicious circle of how do you get the jobs out? how do you get the employment in the united states? the good thing you did mention, a hedge close in her statement about 2016, she did say, we have been skujd by the number of times we have forecast this and it hasn't come to fruition.
she is looking out for 2016. there is a lot of risk. >> one of the things we are talking about is unemployment, she was happy unemployment was reaching these levels they didn't expect it would reach for another couple of years. what the do you take for her commence? >> generally, when you read janet's comments about employment and you read into what she said today, she is saying, it's better but it's not where it needs to be. it's not good. i need it to be good and i need it to be good enough to actually change the direction of prices. we are far from that. >> that's why she is saying we are looking out to 216. it's a long way to go. we are only in, you know, april, 2014. so she is sitting there saying there is a long way to go for this policy to you remain in plates and i actually personally believe the tapering is actually slowing down their ability of achieving their 2016 target. my growth numbers are substantially weak earn theirs. >> let's talk about that. when you say your growing
numbe numbers. >> i think the u.s. economy will grow slightly below it's trend, in a top-line revenue growth environment with 175 workers on average per month, you are just getting 2, 2 and a quarter % growth and an output gap is weighing down on inflation. it sort of becomes a self fulfilling negative cycle. it reduces the influence. >> that's where policy comes in and juices the system. firstcam policy is contractionary and monetary policies, politically cler collect, less accommodating. >> the reason we worry about low inflation is companies will not expand in a low-inflation environment. they will cut and that's why
we -- it slows down growth. steve, you explain things so clearly. thank you for being with us. steve rushutto. general motor wants a federal judge to protect the company for lawsuits over the botched ignition recall. it goes back to the taxpayer bail-out. you will remember back in 2009. the new company that emerged was basically given immunity from any product liability claims stemming from before the wrups. remember the ignition switch recalled involved vehicles made as far back as 2005bankruptcy. remember the ignition switch recalled involved vehicles made as far back as 2005. gm says more than 30 indications have been filed since february. >> that's when most of america first learned about the 2.6 million vehicles being recalled. the 32 crashes in north america and the 13 deaths linked to the faulty parts that could have been fixed for about $0.57 apiece if general motor wanted
to fix them. when i heard this news today, i immediately thought of what general motors' mary barra said. i want you to hear. >> we know the world is watching. we know we will be judged by our actions. >> we know the world is watching, and we know we will be judged by our actions. remember those words. i guarantee you, this show will keep watching. gm's actions speak for themselves. as for the judgment, i will leave that one up to you. okay. to modern american under dog story, modern community banks that somehow survived the recession. more on the main street solutions and the new rules that have them jumping through hoops. you are watching "real money." keep it right here.
people have ditched their desktop computers in favor of tablets and smart phones. google is no exception. the world's largest internet search provider reported sales and profit numbers for the first three months of the year fell short of what investors expected. here is why: the amount of money google gets each time you clip on their ads fell 9%. >> that's because more people are on their mobile devices and when they are, they are less likely to click on ads and follow through with purchases than when they are on their desktops with larger screens. advertisers don't pay as much for mobile ads as they do for desktop ads. shares are down 3% in after hours trading and that's an improvement from where they were now. legal costs took a check out of bank of america's bottom line. reflecting $6,000,000,000 in legal expenses which gives you an idea how much the bank is still paying for the mortgage mortgage mess six years ago. legal bills have cost the bank more than $50,000,000,000 since the financial crisis.
b of a is the second biggest bank after chase morgan. >> focusing on giant banks, but more than 90% are much smaller. talk about commune did i banks which play a very important role in our economy lending to small businesses and folks whose finances often don't fit the rijt criteria of large banks but as patricia sabgba reports f regulations making things tougher for the little guys, too. >> this town needs this meisly one horse institution if only to have someplace where people can come without crawling to potter. >> in the classic film, "it's a wonder life," the community bank embodied the spirit of the american underdog from small towns to yourban streets, community banks still play a vital role in the nation's economy, providing financial services and loans to small businesses and farms and
individuals whose needs and profiles don't always fit the rinlid criteria of big banks. >> rierl areas are an important area served by community banks, especially smaller community banks because those are the areas that large banks don't want to 7 are pulling back from serving. >> typically defined as banks with less than $1,000,000,000 in assets, community banks faired worse than their bigger counterparts during the financial crisis. up to 414 fdic insured banks that failed between january, 2008 and december, 2011, 85% were community banks. >> the roughly 7 ,000 community banks that survive the crisis are wrestling with a costly legacy, the wrath of regulations that require big money and big manpower to implement. >> nothing but the truth so help you god. >> federal reserve writing
rules, however, the regulatory burden for community banks and smaller institutions. >> in the meantime, many community banks are consolidating or getting gobbled up by bigger institutions. >> my concern is that they are going to play a smaller and smaller role in the economy. >> 4, 3 trough. >> at least on film, it's a happy ending. >> bingo! we made it! >> new york. the if he had rad department insurance corporation has issued only one new bank, the amish-backed bank in beardenham, pennsylvania. >> noel wilcox is the senior of grand rapids state bank that has about $230 million in assets. he says regulations are the biggest burden on independent banks like his. he is a member of the independent community bankers of america board. he joins us now from his.
noah, good to see you. thanks for being with us. >> thanks for having me back, ali. great to be here during community banking month. >> we often hear complaints from bankers about regulations, but often, those are bankers who many americans, rightly or wrongly, hold somewhat responsible for the stuff that led to the financial crisis. you guys are sort of at the receiving end of the tough new rules that you say are hurting you. tell me about them. >> absolutely. community banks have been disproportionately impacted by the sins of wall street and as the regulators and as congress crafts rules in the wake of the financial crisis to try to curb that from happening in the future, the laws are and the rules and the regulations are applied universally across the system. at a time community bank sector doesn't have the wherewithal in many cases to pick up on the
expertise, additional compliance folks, attorneys, things of that nature, to comply with those rules and you have a framework that is growing in scope and size intending to address the largest banks in the country when 7,000 of those fdic insured charters are small community banks serving urban and rural areas across the country who have a very simple traditional business model where they are taking local deposits and making local loans and their regulatory framework should reflect that simplicity. >> give me a sense of how, in effect, your customers -- you lend out money for mortgages, commercial loans. how does it affect your customers that these regulations are being imposed on a small back like yours? >> the well, the shear volume of paperwork, you know, if you came any to get a mortgage a few years ago, you might have 20 pages of documents, and i would say it's up wards of probably 40 now, the dis closure language is very complicated. it's not easy for the consumer
to understand, and, you know, these are in the community bank space, they are simple products, talking about traditional, fixed-rate mortgage generally. they may be held in-house by the bank. they may be sold into a secondary market, which is very important for the community banks to have access to. but you are seeing rules promulgated in the wake of some of the worst abuse in the mortgage market by the biggest banks in this country trickling down into the small institutions who are really relationship-based lenders. they understand where their customers live and work and in many indications, like in my area, where it is more rural, many of the big banks just don't want to lend here because it might be large acreage or non-conforming type homes and we are trying to make those loans but struggling underneath the kind of regulatory burden that exists. >> noah, thank you for continuing to keep us up to date on what's going on in the community of this country with the banks.
i know you're proposing a teared systemiered syst system. >> noah wilcox, fourth generation banker joining us from grand rapids, minnesota. you know i am you have firm opinion that even at a growth rate of 7.4%, american investors and businesses have plenty of opportunity to profit in china. is that not to say the world's most populous country doesn't have any worries. as my colleague, patricia sagba reminds me, china's problems come from within, rampant corruption, a state-controlled media. it lives with the threat of separatist uprising, and faces a looming pension crisis. i could go on. trust me. patty does. her point is fair and well made. while china's communist leadership has reloud on astounding economic growth to stimulate jobs and lift millions
of people out of poverty, there are millions to go. so, while there is most definitely lots of money to be made by foreigners in china, it pays to always keep in mind that all politics are, in fact, local. >> that's our show for today. i am ali velshi. thanks for joining us. the stream is uniquely interactive television. in fact, we depend on you, your ideas, your concerns. >> all these folks are making a whole lot of money. >> you are one of the voices of this show. >> i think you've offended everyone with that kathy. >> hold on, there's some room to