Economists: Fed’s ‘clear and present danger’ threshold met
Posted by: in Stocks Money NewsFiled under: Other issues, Federal Reserve, Recession
Durable good orders jumped 5.2% in December 2007, well above the 1.6% consensus estimate. The U.S. Congress and the Bush Administration are progressing full-speed-ahead, albeit with some Senate tweaking, toward a $150 billion fiscal stimulus package that will, at minimum, provide a modest boost in GDP. Meanwhile, the Dow Jones Industrial Average, as the late financial talk show host and journalist Louis Rukeyser would say, amid all of the financial world’s tumult and write-downs and restatements and remonstrations, has dropped… less than 15%.
With the above as backdrop, is this a time for the U.S. Federal Reserve to deviate or perhaps pause from its monetary policy easing path on the thesis that maybe there’s enough stimuli in the system?
“Not on your life,” economist David H. Wang said Tuesday. “The Fed’s ‘clear and present’ danger threshold has been met and we’re going to need an accommodative monetary policy for awhile.” Wang argued that four factors will continue to act as contractionary affects on the U.S. economy for at least the next 6-9 months: more mortgage/MBS defaults, a renewed recognition of risk by investors, tepid job growth, and that nemesis of free world economic growth: high energy prices (primarily oil).
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