Monday, August 15, 2011
Two Fed Officials and Double Dip Recession
William Dudley, ex-Goldman Sachs managing director and chief economist during the 1997 to 2007 decade of “irrational exuberance” and current president of the NY-Fed, said recently that he doesn’t expect the US economy to suffer a double-dip recession.
And then today as if right on queue, another of these Fed officials, Dennis Lockhart, Atlanta Fed president stated that the risk of a US recession had risen in the last two months but an outright contraction will be avoided.
What planet are these two on?
From their ivory towers they make pronouncements as if they have economic crystal balls at the ready and will maintain interest rates at near zero for the next two years.
This will encourage savers to take their money out of banks and place it into stocks or treasuries, ensuring a steady flow of cheap money for corporations via stock purchase and the US Treasury via the purchase of AA rated bonds.
OMOTS will through their taxes continue to subsidize the government by keeping money out of the banks and instead use it to buy stocks, US bonds or pay off debt. And through taxes REPAY the monies borrowed on their behalf by the US government.
Will either of these two choices assist in the creation of jobs or expand smaller businesses?
I think not.