Fed can't save U.S. economy

Discussion in 'Economy' started by hvactec, Aug 11, 2010.

  1. hvactec
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    hvactec VIP Member

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    8/11/2010
    How bad is it? It's so bad economists are saying the U.S. Federal Reserve will maintain its ultra-loose monetary policy into at least 2012. The Fed itself didn't set an end-game target date in its policy statement yesterday, beyond saying that economic conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period." If the loose money effort runs deep into 2012, that would drag the Fed's attempt to boost the U.S. economy into a fourth year.

    That's a long time to be messing around with massive monetary stimulus and interest rates that start at a fed funds rate just above zero -- first established in December, 2008 -- and never make it much beyond 3% anywhere else. The yield on short-term U.S. government bills is now well below 1%, but still the U.S. economic recovery isn't getting off the ground. The Fed's statement yesterday opened with a grim review of the current environment, itself a testament to the limits of monetary expansionism:

    Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

    Exactly why the U.S. economy remains locked in first gear is the subject of much policy wrangling, raising calls for more fiscal and monetary stimulus. The most obvious and logical explanation for the apparent paralysis is that U.S. economy is being held back by the ball and chain of the Obama administration's myriad interventions, regulations and massive fiscal expansion. Some of these items are reviewed in Jim Powell's Cato Institute commentary elsewhere on this page. The Fed seems to think it can overcome the burden of spending, regulation and rising taxes by providing various forms of easy money. The Fed said yesterday that it would keep rates low and keep holding government-based assets at current levels. There were no signs that the Fed anticipated the arrival of deflation any time soon, and thus would not have to prepare for another round of "quantitative easing," which would mean buying whole truckloads of new government debt -- a practice otherwise known as monetizing the debt and printing money so as to promote inflation.

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  2. Douger
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    Douger BANNED

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    The republicans will fix everything in Nov.
    Theyza reddy ta vote fur chanje !
    [ame=http://www.youtube.com/watch?v=03iwAY4KlIU&feature=related]YouTube - ‪Appalachian English‬‎[/ame]
     
  3. B. Kidd
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    B. Kidd Gold Member

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    Also, the Hussein admin. has no clout with China.
    China refused to cater to the admin.'s demands that China allow its' currency to rise in value against the dollar. A weaker dollar against the yuan would have made American products more competitive in China while making Chinese goods in the U.S. more expensive.
    China said no F'in way.
     
  4. uscitizen
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    uscitizen Senior Member

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    Senator Rand Paul will fix it all next year.

    Butt cerously folkz.

    The Fed cannot fix the exonomy.

    How can it keep propping up a failed economic model?
     
    Last edited: Aug 12, 2010

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