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Friday, February 16, 2018

The Federal Reserve broke the American economy

The US economy is broken.

I tried to explain that belief often over the past 10 years. I argued that not only was the American economy weak, but it was damaged — broken — by years of too-low interest rates, excessive federal spending and experimental Federal Reserve policies.

Now you are beginning to see what I meant.

Over the past few months, US economic statistics have shown some signs of life. Even inflation picked up last month.

That’s what you saw happen over the past two weeks when there was a massive drop in stock and bond prices — and a huge jump in interest rates.

The modest improvement in US businesses — with the economy growing at an acceptable, but not robust pace of around 3 to 4 percent a year — is causing overreactions by the financial markets.

And that will probably lead to more tightening of interest rates by the Fed than would have occurred otherwise.


1 comment:

Anonymous said...

And your point is???