Busted: Bankers and The Global Economy

July 17, 2008

U.S. Fed Discusses the Real Economy

Recently, the Fed discussed the housing market and economic slump in its’ latest open meeting. Currently, the housing market is one of the single largest factors in the U.S. economic decline. According to the Fed, the outlook for the housing market remained bleak, with falling prices, slow sales, high inventories of unsold homes, and further declines in construction activity over coming months.

Despite level borrowing from the Fed, mortgage rates have been increased and foreclosures continue to rise in the United States. Falling wealth and real income, tightening credit conditions, rising energy prices, and sharply declining consumer sentiment were seen as likely to restrain consumer spending later this year, particularly after the effects of the fiscal stimulus trail off.

The economic stimulus as dispensed by the Internal Revenue Service has been very slow. Instead of mailing out in two groups as originally promised, the IRS instead decided to slowly milk the process, dispensing the stimulus based on social security numbers over a period of several months. As a result, the economic stimulus was spread out over a period of time. A few recipients still may not have received their stimulus payment. It is almost as if the government couldn’t afford to let go of the money, deciding to use a payment plan, even though the money had been borrowed since February.

The Fed declined to comment on the effect of the government holding back on the stimulus money over time. Inflation is up and based on their barometers, the Fed is looking at more of the same. Because of gas and food prices, the Fed is very worried about consumer confidence.

While the news isn’t good, at least the nation is being more realistic. Economists say June’s sharp rise in unemployment is just the start of a relentless climb in the number of unemployed.

As many European Union bankers have decided, the Federal Reserve now has “zero credibility” because they have not handled their responsibilities well. Unfortunately, the demands of the patient have the doctor turning in circles.


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