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February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007 The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.
July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said. "Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/
December 11, 2007 Somehow the Fed misses the obvious.
[Image from: CNNMoney.com]
December 13, 2007 [from
The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [
N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the
Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...
What should the Federal Reserve do now?
Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?
Except for the brief rise in employment in 2000, the state has shed 300,000 employed people. During that same time, the automobile industry has been struggling to survive... the primary source of the lost employment... and generating lower profits.
6 comments:
It seems likely that Detroit is going to continue dragging the state down.
C'mon now... that's all George W. Bush's fault... oh, and John Engler's. Let's keep it real!
--Nick
www.RightMichigan.com
You need to do some more digging.
1. How much of the current budget is "pass through" funds? You know, those Fed funds that are sent to Michigan with a designated purpose (ie, transportation, education, Medicaid, etc)? Those funds cannot be cut by our Legislature unless we refuse the funds from the Fed.
2. How much of those funds are payments for our State bonds? This is a function of our credit rating and our past sins, and cannot be easily cut.
3. How much of that budget is for pensions, etc that cannot be cut, and in fact, have expanded with our early retirements?
4. How much of those funds are earmarked by State Constitution? Didn't we vote, for instance, to only use hunting and fishing licenses, etc for our outdoor recreation facilities? Here's a hint -- a city park in Michigan can ask for $1 million and get it, but that same city can't get $1 for additional police protection...
Tim,
Some good points, but the question is for how long do we have to live with bad decisions? From the numbers, it appears the answer is "indefinitely."
I suggest that state government does have control over its own expenses to a larger degree than you infer.
Bruce -
We do need to get a breakdown of what we can cut quickly, what we can cut only over long periods of time, and what can't be cut under any circumstances.
As for the question of how long we must live w/ bad decisions, I'd suggest, "Until the debt it paid."
Tim,
One can debate specific programs, but the key is in the budgeting process itself.
There is a presumption that existing programs...
1. must be continued and
2. must be expanded
There is also a presumption that every contract is set in stone.
I suggest that the automobile companies have already set an example for the state in the way that they have trimmed expenses from the current budget through the elimination of programs, people, and onerous contracts.
It takes a lot of guts for a governor to face entrenched forces and say it's time to cut back. Unfortunately, this governor is not one to take that on that challenge.
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