Slow, slower, and maybe even stop—that’s a quick summary of how Federal
Reserve Board chairman Ben Bernanke sees the U.S. economy. The economy
grew at an annual rate of 2.5 percent last year, 1.9 percent in the
first quarter of this year, “and available indicators point to a
still-smaller gain in the second quarter” he advised congress last week.
Household spending is slowing down because “confidence remains
relatively low” (at its lowest level since December); numerous factors
(a supply overhang, unavailability of credit) “impede growth” in the
housing sector; manufacturing production has slowed; business investment
has “decelerated”; there is “further weakness ahead” for investment
demand; and “reduction in the unemployment rate seems likely to be
frustratingly slow.”
Now for the bad news. “U.S. fiscal policies are on an unsustainable path.” In the hope of forcing the politicians to do something to prevent the economy that is due to fall off a “massive fiscal cliff” at year end, when scheduled tax increases and spending cuts will, if implemented, cut 4 percent out of GDP and throw us into a sharp recession, Bernanke is holding fire – there will be no QE3, at least not just yet, and probably not until the August meeting of central bankers in Jackson Hole, Wyoming, if then. Besides, some of Bernanke’s colleagues feel the Fed has done enough, and that interest rates are already so low that a QE3 can’t lower them any further. Former Democratic Treasury Secretary Bob Rubin has the same view about the fecklessness of a possible QE3. The International Monetary Fund disagrees, and would have the Fed do more to ease monetary policy.
Read more: http://www.weeklystandard.com/blogs/economy-slowing-perhaps-not-long_648816.html
Now for the bad news. “U.S. fiscal policies are on an unsustainable path.” In the hope of forcing the politicians to do something to prevent the economy that is due to fall off a “massive fiscal cliff” at year end, when scheduled tax increases and spending cuts will, if implemented, cut 4 percent out of GDP and throw us into a sharp recession, Bernanke is holding fire – there will be no QE3, at least not just yet, and probably not until the August meeting of central bankers in Jackson Hole, Wyoming, if then. Besides, some of Bernanke’s colleagues feel the Fed has done enough, and that interest rates are already so low that a QE3 can’t lower them any further. Former Democratic Treasury Secretary Bob Rubin has the same view about the fecklessness of a possible QE3. The International Monetary Fund disagrees, and would have the Fed do more to ease monetary policy.
Read more: http://www.weeklystandard.com/blogs/economy-slowing-perhaps-not-long_648816.html
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