In reality, what the Fed has said is that, yes we realize that there's a problem and the potential for further problems, but we aren't going to do anything about it at this time.
Again I ask, what the hell can they do? Turn us into another Japan? Here's what Fleck had to say on that yesterday...
thestreet.com
After-the-Fact Folly: If that's not enough to straighten out people who believe the Fed is a slam-dunk to rescue us from a protracted slump, they might want to read an article in the current issue of The Economist called "A Double Dip?" It cites a recent study by the Bureau of Labor Statistics that "finds little difference between the speed with which the Bank of Japan responded to its downturn in the early 1990s and the Fed's response last year." Said differently, the Japanese responded just as quickly as the Fed did, and it didn't help them out. One of the problems with Japan, as stated in the article, is that "interest rates at or close to zero keep inefficient firms in business, and the persistence of excess capacity may then worsen deflation."
Forgive and for Debt: That does happen to be true. It appears that in Japan, they just refuse to let bad loans go bust, thereby perpetuating the problem. But a variation on that theme could play out here. The story says that monetary easing may "help delay a necessary, yet painful purging of excesses from the bubble years." And it notes the fact that last year, the recession appeared to be one of the mildest on record, and therefore "too mild to do much about the excesses." |
