WHEN: Today, Monday, May 1st
WHERE: CNBC's "Squawk Box"
Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with former Chairman of the Federal Reserve Ben Bernanke today on CNBC's "Squawk Box" (M-F, 6AM-9AM ET). Following are links to video of the interview on CNBC.com:http://video.cnbc.com/gallery/?video=3000614640, http://video.cnbc.com/gallery/?video=3000614641, http://video.cnbc.com/gallery/?video=3000614647, http://video.cnbc.com/gallery/?video=3000614649 and http://video.cnbc.com/gallery/?video=3000614654.
All references must be sourced to CNBC.
BERNANKE ON FED EXIT
SO FAR SO GOOD. YOU KNOW, WASN'T TOO LONG AGO WHEN PEOPLE ON SHOWS LIKE THIS WERE SAYING THAT WE WERE GOING TO BE HAVING HYPERINFLATION AND HUGE STOCK MARKET BUBBLES AND DOLLAR COLLAPSE AND ALL KINDS OF TERRIBLE THINGS WERE GOING TO COME. BUT IN FACT IT'S GONE PRETTY SMOOTHLY. THE FED IS ON THE PROCESS FROM EXITING FROM EASY MONEY. THE ECONOMY IS DOING PRETTY WELL. THE UNEMPLOYMENT RATE IS 4.5% INFLATION IS CLOSE TO THE FED'S TARGET. ALL THOSE THINGS ARE ON TRACK.
BERNANKE ON THE ECONOMY LOOKING GOOD
IF YOU LOOK AT THOSE KINDS OF CYCLICAL INDICATORS LIKE GDP GROWTH WE'RE ABOVE 12% ABOVE THE PRE-CRISIS PEAK. WE MADE EVERYTHING UP THAT WE LOST PLUS 12%. 16 MILLION JOBS, 4.5% UNEMPLOYMENT. INFLATION IS FINE. STOCK MARKET IS UP, HOUSING MARKET. ALL THOSE THINGS ARE LOOKING GOOD. ON THOSE INDICATORS, YEAH, IF YOU'D TOLD ME THREE, FOUR YEARS AGO THIS IS WHERE WE'D BE I WOULD HAVE BEEN PRETTY HAPPY.
BERNANKE ON THE INTEREST RATE ENVIRONMENT
WE'VE SEEN THAT THE INTEREST RATE ENVIRONMENT, NOT JUST THE FED'S ACTIONS OR ECB'S ACTIONS, BUT JUST THE FACT THAT THE INTEREST RATE OF, YOU KNOW, THAT'S NEEDED TO GET TO FULL EMPLOYMENT IS JUST MUCH LOWER. THAT'S JUST A LONG TERM THING. IT COMES FROM GLOBAL SAVINGS. IT COMES FROM LOW RETURNS ON NEW CAPITAL INVESTMENTS. SO, THE FED'S VERY LOW INTEREST RATES ARE NOT AS STIMULATIVE AS IT WOULD HAVE BEEN, YOU KNOW, 10, 15 YEARS AGO BECAUSE WE'RE NOT THAT FAR FROM WHERE INTEREST RATES ARE NEUTRAL.
BERNANKE ON RATES WILL RISE
PRODUCTIVITY WILL PICK UP. WE DO HAVE A LOT OF PROMISING TECHNOLOGICAL CHANGES ON THE HOAR SUSAN FOR EXAMPLE. AND PRODUCTIVITY HAS BEEN UNUSUALLY THE OTHER REASON IS PART OF THE REASON FOR LOW INTEREST RATES IS SOMETHING I'VE TALKED ABOUT IN THE PAST WHICH IS GLOBAL SAVINGS GLUT. THERE'S A LOT OF SAVINGS BEING DUMPED ON THE WORLD MARKET BY COUNTRIES LIKE CHINA WHICH ATLEAST UNTIL RECENTLY WERE BUYING UP A LOT OF ASSETS. AND THAT IS ALSO PUSHING INTEREST RATES DOWN. SO I THINK THEY'LL PROBABLY GO UP SOME IN THE FUTURE.
BERNANKE ON OVER 3% GROWTH
BERNANKE: ON A SUSTAINED BASIS IT'S CERTAINLY POSSIBLE. BUT PROBABLY NOT THAT LIKELY. I THINK IF THERE'S A BIG TAX CUT FOR EXAMPLE THAT LOWERS TAX RATES, YOU MIGHT HAVE A BUMP, BECAUSE OF THE INCREASED DEMAND. INCREASED CONSUMER SPENDING.
SORKIN: THAT GETS YOU OVER 3%?
BERNANKE: PROBABLY NOT. I WOULD -- I WOULD TAKE THE UNDER ON THAT.
BERNANKE ON DEMOGRAPHICS
WE'RE NOT IN THE SAME WORLD WE WERE IN 20, 30 YEARS AGO. IN PARTICULAR, OUR WORKFORCE IS GROWING MUCH MORE SLOWLY. SO JUST PURE DEMOGRAPHICS. NUMBER OF PEOPLE AVAILABLE TO WORK. IT'S NOT CONSISTENT WITH 4% GROWTH. AND THEN, YOU KNOW, AT THE MOMENT WE'RE KIND OF IN A LULL IN TERMS OF THE APPLICATION OF NEW TECHNOLOGIES TO THE ECONOMY.
BERNANKE ON FULL EMPLOYMENT
BEN BERNANKE: I THINK OF THIS FULL EMPLOYMENT AS KIND OF A ZONE RATHER THAN A SINGLE NUMBER. BUT CLEARLY WE'RE APPROACHING THE LEVEL OF UNEMPLOYMENT WHEREBY IT'S JUST MUCH HARDER TO GET IT MUCH LOWER, BECAUSE IF YOU DO, YOU KNOW, IT'S JUST GOING TO BE HARD FOR FIRMS TO FIND WORKERS, IT'S GOING TO START PUSHING WAGES AND PRICES MORE QUICKLY. SO THE FED WOULD PROBABLY REACT TO THAT.
ANDREW ROSS SORKIN: BUT WE DO WANT WAGE GROWTH, THOUGH.
BERNANKE: WE WANT REAL WAGE GROWTH. WE WANT WAGES TO GROW MORE QUICKLY THAN PRICES.
BERNANKE ON SMART POLICIES
I WOULD JUST SUGGEST TRYING TO DO SMART POLICIES THAT IMPROVE PRODUCTIVITY AND IMPROVE POTENTIAL. AND IF IT'S 2.5, GREAT. IF IT'S 3, EVEN BETTER. BUT THERE'S LOTS OF THINGS THAT AFFECT GROWTH, SO YOU CAN'T REALLY FINE-TUNE THAT. BUT YOU CAN TRY TO MOVE THINGS IN THE RIGHT DIRECTION.
BERNANKE ON HIS LIFE AT THE FEDERAL RESERVE
I MISS SOME PARTS OF IT. I MISS A LOT OF THE PEOPLE. I MISS HAVING 200 GREAT RESEARCH ASSISTANTS. ANYTHING YOU WANT TO KNOW, YOU GET. BUT I'M CERTAINLY HAPPY TO BE A CIVILIAN AND NOT HAVE TO MAKE THOSE DECISIONS ANYMORE.
BERNANKE ON CURTAILING THE FED
OBVIOUSLY THERE'S BEEN VARIOUS BILLS AND PROPOSALS TO CURTAIL THE FED'S INDEPENDENCE WHICH I THINK WOULD BE A BIG MISTAKE. I THINK, THOUGH, TO SOME EXTENT, IT'S NOT SO MUCH THAT THE FED'S ACTIONS ARE CAUSING PARTISAN REACTION. I THINK IN SOME SENSE THE HIGH LEVEL OF PARTISANSHIP IS CAUSING THE REACTION TO THE FED… BUT I THINK PERHAPS BECAUSE THE CONGRESS PERCEIVES THE FED AS HAVING BEEN SUPPORTIVE OF OBAMA'S RECOVERY, PERHAPS, OR FOR WHATEVER REASON, IT'S NOW AN ARTICLE OF PARTISAN FAITH TO BE AGGRESSIVE AGAINST.
BERNANKE ON RATES
THE FED'S POLICIES CONTRIBUTED SUBSTANTIALLY TO 16 MILLION NEW JOBS, THE DECLINE IN UNEMPLOYMENT RATE. THE PEOPLE WHO BENEFIT THE MOST FROM THAT ARE WORKING CLASS PEOPLE. IT'S VERY INTERESTING. THERE'S ALL THIS TALK ABOUT HOW THE FED'S POLICIES HELP THE RICH. LATELY, WHEN THE FED WAS THINKING ABOUT RAISING RATES, IT WAS THE HEDGE FUND GUYS WRITING OP-EDS SAYING OH, RATES ARE TOO LOW, THE FED'S GOT TO RAISE RATES. WHEREAS PEOPLE LIKE FED UP, WHO SUPPOSEDLY REPRESENT WORKERS ARE SAYING NO, NO, KEEP RATES LOW. SO IT WAS REALLY THE CASE THAT THE FED'S LOWER INTEREST RATE POLICIES WERE HELPING RICH PEOPLE I WOULD THINK YOU WOULD GET THAT POLITICS GOING IN THE OTHER DIRECTION.
BERNANKE ON A SLOW GROWTH WORLD
I DON'T MEAN TO DENY THAT LOW INTEREST RATES HAVE CAUSED PROBLEMS FOR SOME SAVERS. ABSOLUTELY. AND I'M SURE YOU'LL GET LOTS OF CALLS ON THAT. BUT I WOULD SAY THAT THE LOWER INTEREST RATE ENVIRONMENT IN THE WORLD WE SEE TODAY, WHICH IS NOT JUST THE UNITED STATES, IT'S ALL AROUND THE WORLD, IS LESS CENTRAL BANK POLICY AND MORE JUST THE FACT THAT WE ARE IN A SLOW GROWTH WORLD NOW WITH SLOW POPULATION GROWTH, SLOW PRODUCTIVITY GROWTH WHICH MEANS THE RATE OF RETURN INTO INVESTMENT IS LOW. AND THAT IS SOMETHING THE CENTRAL BANK CAN'T DO MUCH ABOUT.
BERNANKE ON THE FED'S IMPACT ON THE ECONOMY
BECKY QUICK: IT'S THE EXTRAORDINARY ACTIONS AND THE FED DOING THINGS THAT HAD SUCH A HUGE IMPACT ON THE ECONOMY THAT HADN'T BEFORE THAT PROBABLY CHANGED A LOT OF PEOPLE'S MINDS. PAID MORE ATTENTION.
BERNANKE: WELL, BUT IF THAT WAS THE REASON, THEN GIVEN THAT THOSE THINGS SEEM TO HAVE WORKED THAT WE HAVEN'T HAD THE INFLATION, THAT THE ECONOMY HAS BEEN RECOVERING, THAT THE U.S. IS DOING MUCH BETTER THAN OTHER INDUSTRIAL ECONOMIES. IF THAT WAS THE REASON, YOU WOULD THINK BY NOW PEOPLE WOULD SAY OH, OK. WE WERE WRONG, YOU'RE RIGHT. SORRY. BUT OBVIOUSLY, THAT HASN'T HAPPENED.
BERNANKE ON BORDER ADJUSTMENT TAX
IT HAS A LOT OF APPEAL IN MANY WAYS, FOR EXAMPLE, IT ELIMINATES THE INCENTIVE FOR COMPANIES TO MOVE THEIR HEADQUARTERS FOR TAX REASONS. IT ELIMINATES SOME OF THIS TRANSFER PRICING WHERE YOU'RE FOOLING AROUND TRYING TO FIGURE OUT WHERE THE PROFITS WERE ACTUALLY BOOKED VERSUS WHERE THEY'RE ACTUALLY EARNED. IN MANY WAYS IT'S A GOOD SYSTEM. I THINK A COUPLE OF POINTS, THOUGH. ONE THAT IT IS POLITICALLY GOING TO BE A VERY TOUGH SELL. BUT SECONDLY, THE TRANSITION PROBLEMS ARE PRETTY SERIOUS. SO FOR EXAMPLE, IN ORDER FOR THE SYSTEM TO WORK THE WAY IT'S ANTICIPATED, YOU WOULD HAVE TO SEE A VERY BIG APPRECIATION IN THE DOLLAR. SOME PEOPLE SAY 25%. AND THAT WOULD HAVE A LOT OF SIDE EFFECTS. IT WOULD, FOR EXAMPLE, AFFECT THE DEBT POSITIONS OF EMERGING MARKET ECONOMIES THAT HAVE BORROWED IN DOLLARS. IT WOULD AFFECT THE WEALTH OF AMERICANS WHO OWN FOREIGN CURRENCY DENOMINATED ASSETS. SO, THERE ARE A LOT OF BIG TRANSITION ISSUES TO WORRY ABOUT. SO I THINK, YOU KNOW, I'M KIND OF ON BOTH SIDES OF THIS ONE. BECAUSE I THINK IT'S VERY INTERESTING IN PRINCIPLE.
BERNANKE ON DODD/FRANK
THE BIGGEST PARTS OF DODD/FRANK WERE GOOD AND THEY NEED TO BE RETAINED. THE ONE THING IN PARTICULAR I HAVE WRITTEN ABOUT THAT I THINK IS EXTREMELY IMPORTANT, THERE'S WHAT TECHNICALLY CALLED TITLE 2 OF DODD/FRANK, WHICH IS THE LIQUIDATION AUTHORITY. SO THERE IS A BUNCH OF NEW RULES…AND FOR REASONS WHICH I DON'T REALLY FULLY UNDERSTAND, THERE'S A LOT OF TALK ABOUT REPEALING THAT WHOLE THING, BUT NOT REPLACING IT WITH ANYTHING. AND I THINK THAT WOULD BE A VERY, VERY UNWISE THING TO DO.
BERNANKE ON TRUMP'S TAX PLAN
BERNANKE: WE DON'T KNOW MUCH ABOUT IT. IN FAIRNESS WE HAVE TO SEE THE WHOLE PLAN. IN TERMS OF THE ONE PAGE SUMMARY IT LOOKS LIKE IT'S MOSTLY CUTTING TAX RATES I WOULD SAY I WANT TO SEE SOME FOX REFORM THAT MAKES THE SYSTEM SIMPLER, MORE EFFICIENT, LOWER RIGHTS, ALSO FEWER LOOPHOLES. I ALSO THINK I WOULD PUT MORE EMPHASIS ON THE CORPORATE SIDE THAN THE PERSONAL SIDE.
QUICK: IN TERMS OF REFORM?
BERNANKE: I THINK THAT'S WHERE THE REAL MONEY IS, SO TO SPEAK.
BERNANKE ON MANUFACTURING
I DON'T THINK THERE'S MUCH CHANCE THAT WE'RE GOING TO BRING BACK THE ASSEMBLY LINES OF, YOU KNOW, 50 YEARS AGO. AT THE SAME TIME GROWING INDUSTRIES THROUGHOUT THE ECONOMY, AND THAT'S, YOU KNOW, THAT'S WHERE MOST OF THE JOBS ARE GOING TO BE. AND IT'S REALLY THE JOB AND THE INCOME THAT MATTERS TO PEOPLE I THINK. NOT SO MUCH WHETHER IT'S MANUFACTURING OR SERVICES.
BERNANKE ON POLITICS
IT'S TRUE THAT WE NOW HAVE A ONE-PARTY CONTROL OF THE CONGRESS AND THE WHITE HOUSE. BUT WITHIN THE REPUBLICAN PARTY AS WE'VE ALREADY SEEN THERE'S SOME BIG DIVISIONS. AND THEN OF COURSE YOU DO HAVE DEMOCRATS WITH BLOCKING THE MINORITY IN THE SENATE. SO POLITICALLY IT'S GOING TO BE A MUCH SLOWER PROCESS.
BERNANKE ON THE BALANCE SHEET
THEY ARE GOING TO REDUCE THE BALANCE SHEET. THEY ARE GOING TO WANT TO MAINTAIN MORE BANK RESERVES THAN BEFORE THE CRISIS BECAUSE THEY WANT TO RUN MONETARY POLICY WITH A LARGE AMOUNT OF RESERVES AND REASONS FOR THAT. SO, I DON'T THINK THEY ARE GOING TO GO BACK TO THE PRE-CRISIS LEVEL BY ANY MEANS. BUT I DON'T THINK THEY ALSO HAVEN'T BOUGHT THE ARGUMENTS I'VE MADE ABOUT KEEPING IT SORT OF RELATIVELY LARGE.
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