Washington politicians are pointing the U.S. economy straight into a liquidity trap and instead of a bright economic future, the U.S. is looking at years of high unemployment, weak GDP growth and the possibility of widespread deflation. [read full story]
The U.S. economy has a long way to go before the economic recovery will be either sustainable or robust. Monetary indicators don’t look good and are once again getting worse. I am concerned that the financial system hasn’t recovered enough for the Federal Reserve to withdraw from its program of quantitative easing. While most of the […] [read full story]
Savings increased but for the wrongs reasons The personal savings rate in October was estimated to be 2.4% which was an increase of 1.4% from September’s savings rate. Normally, during periods of rising unemployment and increasing economic hardship the personal savings rate declines because some households spend more than they earn. When consumers are confident about […] [read full story]
Last week’s economic data is underestimating deflation. On Wednesday the Bureau of Labor Statistics (“BLS”) announced that the consumer price index (“CPI”) declined by 1.0% in October which was the biggest single one month reported decline since before World War II. Broad based deflation exacerbates the already severe credit crisis and increases cash hoarding by […] [read full story]
Even while the Fed and Treasury are fighting deflation and a serious recession, they are laying the ground work for a new liquidity bubble with the potential for devastatingly high inflation. While the current news is dominated by recessionary GDP, falling consumer confidence, banking rescues, incredible stock market volatility and frozen short term money markets, […] [read full story]
Money Supply The Fed is back at it again; its pushing money supply as it tries to reinflate the economy. Money supply, as measured by seasonally adjusted M2, hit a new all time high of $7,870.4 billion and on a non-seasonally adjusted basis rose to $7,867.5 billion. However, because the global economy is stuck in […] [read full story]
A few weeks ago I wrote that money supply was about to blast off. And, last week the data showed that the Fed was pumping money (as measured by M2 on a seasonally adjusted basis) into the system at greater than a 100% annualized rate. Well, this week we’ve reached orbit and are circling the […] [read full story]
October 4, 2008, 6:02 pm Will Paulson’s Two Plans Unplug the ‘Liquidity Trap’? By Mark Sunshine Editor’s note: Mark Sunshine, president of the commercial lending institution First Capital, writes a guest post about why we may be heading into what’s called a liquidity trap. This means that monetary policy, including interest-rate changes, can’t prevent a […] [read full story]
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