The deep economic hole we were in justified extraordinary measures. I think the Fed has been creative in finding ways to stimulate the economy when it ran out of traditional interest rate tools. The Fed has made a very very large expansion of the money supply. Though the Fed can reverse its measures, it cannot do it without inflation. While we definitely won't have runaway inflation, inflation would probably be higher than the Fed's 2% target.
This article does a good job of illustrating how crucial the timing of the Fed's actions will be to determining whether inflation can be kept under control without hindering the recovery. The Fed has certainly found creative ways to stimulate the economy, but I think these new measures may make figuring out the timing even more challenging. For example, car sales fell drastically when cash for clunkers ended; will the same happen when other measures like the homebuyer's credit end? It's very hard to predict.
This is a lot of money we are dealing with, especially after reading an article posted on the blog that puts trillion in grasping terms. I agree with you Christina, as things are going to be very challenging now. I always wonder what goes through Ben Bernanke's mind, and how pressured he feels to make these huge decisions. I am also curious what "recovery" we have specifically seen as of lately as the article points out.
3 comments:
The deep economic hole we were in justified extraordinary measures. I think the Fed has been creative in finding ways to stimulate the economy when it ran out of traditional interest rate tools. The Fed has made a very very large expansion of the money supply. Though the Fed can reverse its measures, it cannot do it without inflation. While we definitely won't have runaway inflation, inflation would probably be higher than the Fed's 2% target.
This article does a good job of illustrating how crucial the timing of the Fed's actions will be to determining whether inflation can be kept under control without hindering the recovery. The Fed has certainly found creative ways to stimulate the economy, but I think these new measures may make figuring out the timing even more challenging. For example, car sales fell drastically when cash for clunkers ended; will the same happen when other measures like the homebuyer's credit end? It's very hard to predict.
This is a lot of money we are dealing with, especially after reading an article posted on the blog that puts trillion in grasping terms. I agree with you Christina, as things are going to be very challenging now. I always wonder what goes through Ben Bernanke's mind, and how pressured he feels to make these huge decisions. I am also curious what "recovery" we have specifically seen as of lately as the article points out.
Post a Comment