The Dallas Fed’s latest manufacturing gauge has imploded! It fell to -17.5 from -7.4, the worst reading in 11 months. The New York and Philadelphia indices tanked, and the overall plunge in these up-to-date manufacturing surveys over the past couple of months is one of the worst on record!
The Wall Street Journal reported on Monday …
“The Federal Reserve is just days away from ending one of the major steps to aid the U.S. economy — but the effort has done little to solve the original problem: The government and individuals alike are still heavily in debt.”
The Journal goes on to make the same argument:
“The fundamental problem is that reversing the trend of piling on the debt requires some combination of cutting spending, growing income or the economy, and inflation. But wage growth is stagnant and home prices, which underpin much of the debt problem, are still falling.
“Meanwhile, in a vicious circle, businesses aren’t hiring or investing because they know consumers are tapped out. Banks, for their part, are hoarding cash, being stingy with new loans.
Ben Bernanke admitted in his most recent press conference:
“We don’t have a precise read on why this slower pace of growth is persisting … Some of the headwinds that have been concerning us, like the weakness in the financial sector, problems in the housing sector, balance sheet and deleveraging issues, may be stronger and more persistent than we thought.”
If you’re counting on the Fed to get things right, good luck! They got the dot-com bubble wrong. They got the housing bubble wrong. Their plan to underwrite an economic recovery has proven to be the wrong medicine for what ails the nation.