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Three Federal Reserve officials are out today with divergent views on the economy and on whether the Fed should buy more Treasury bonds (which is known to some as quantitative easing) to push down long-term interest rates and stimulate growth.
Two officials, the Minneapolis Fed's Narayana Kocherlakota and the Boston Fed's Eric Rosengren, had gloomy assessments of the economic outlook. Mr. Kocherlakota said he's revising down his growth forecasts, which could be a leading indicator of the way the rest of the Fed is going. One official, the Philadelphia Fed's Charles Plosser, wasn't totally downbeat about the economy, but was hardly encouraging.
All three came out differently on whether the Fed should do more to support growth. Mr. Kocherlakota's discussion is especially intriguing. He's been skeptical of doing more, but his gloomy forecast clearly has him looking intently at the Fed's options.
Here they are in digestible categories:
The Dove: The Boston Fed's Eric Rosengren, who makes the strongest case to date that the Fed should do more to support the economy: “I've called this talk 'How Should Monetary Policy Respond to a Slow Recovery?' My answer to that question is: vigorously, creatively, thoughtfully, and persistently, as long as we have options at our disposal. And we do have options, despite having pushed short-term rates to the zero lower bound.” (Read the speech.)
The Hawk: The Philadelphia Fed's Charles Plosser wouldn't support further action: “It is difficult, in my view, to see how additional asset purchases by the Fed, even if they move interest rates on long-term bonds down by 10 or 20 basis points, will have much impact on the near-term outlook for employment. Sending a signal that monetary policymakers are taking actions in an attempt to directly affect the near-term path of the unemployment rate, and then for those actions to have no demonstrable effects, would hurt the Fed's credibility and possibly erode the effectiveness of our future actions to ensure price stability. It also risks leading the public to believe that the Fed is seeking to monetize the deficit and make it more difficult to return to normal policy when the time comes.” (Read the speech.)
The Fence Sitter: The Minneapolis Fed's Narayana Kocherlakota says he is keeping an open mind: “Chairman Bernanke observed in his August 27 speech that each of these tools has benefits and drawbacks that must be balanced against each other. With QE (quantitative easing), I would say that the multiple effects make the calculus even more difficult than usual.” (Read the speech.)
On the economy:
The Dove: “At the beginning of 2010, the unemployment rate was 9.7 percent ? There has been a consistent view that the recovery would be weak and make only limited progress on reducing unemployment. While through April the forecasts were getting more optimistic about labor market trends, since then forecasters have been raising their forecasts for unemployment. Regrettably, I have to concur with the view expressed in these forecasts – that the unemployment rate is likely to be very close to the very elevated level at the beginning of the year.”
The Hawk: “As the economy strengthens and firms become convinced that the recovery is sustainable, hiring will pick up over the rest of this year and in 2011. But it may take even longer to address the sectoral, geographic, and skill imbalances that seem to plague the labor markets.”
The Fence Sitter: “We have recently updated our estimates for future growth from our Minneapolis forecasting model. Our September estimates are distinctly lower than our August estimates. I now expect GDP growth to be around 2.4 percent in the second half of 2010 and around 2.5 percent in 2011. Together over 2010 and 2011, I'm now predicting that GDP will grow around 2.5 percent per year. In contrast, in my first speech about seven months ago, I predicted that GDP would grow around 3.0 percent per year over 2010 and 2011. There is a recovery under way in the United States. But it is a distinctly modest one—and even more modest than I expected at the beginning of this year.”
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This republic has never had a more incompetent groups in dc and this is totally across the board.
“Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the government of these United States and the people of the United States out of enough money to pay the Nation’s debt. The depredations and iniquities of the Fed has cost this country enough money to pay the National debt several times over. These twelve private credit monopolies were deceitfully and disloyally foisted upon this country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia and thus drove a wedge between the Allies in the World War.” -Congressman Louis T. McFadden, Chairman of House Banking Committee 1921 through 1931 (In a speech made before the House in 1934)
http://www.scribd.com/doc/16502353/Congressional-Record-June-10-1932-Louis-T-McFadden
Where? What is he talking about? Where are the jobs waiting to be filled and where are the corresponding rising wages in particular new sectors? There’s just nothing behind that statement to support it.
SOS from the P.T. Barnum NWO globalist crime syndicate. Mr. Dowling, I like your style!
My dad had a saying, You’re either an IDIOT or a LIAR, and I don’t know which worse. I vote for liars
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal’s Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com.
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