One by one, Federal Reserve regional presidents have begun to admit that another recession has started, or at least is on the horizon. Some have made suggestions about what can be done, but none of these ideas seems compelling.
Charles Evans, the chief of the Chicago Fed, said in a speech recently that, “In the summer of 2009, the U.S. economy began to emerge from its deepest recession since the 1930s. But today, two years later, conditions still aren’t much different from an economy actually in recession.”
That is an odd way to frame the issue. Either the economy is in a recession or it is not.
Evans is among the members of the Fed who believe the agency should take “strong action.” This could mean the purchase of more Treasury debt in the open market. It is hard to see what the central bank can do beyond that. Fed chairman Ben Bernanke insists that it falls to Washington, and new legislation, to fix the economic growth problem. Many politicians believe the Fed must act first, and perhaps alone.
Many say that the economy will fail to improve until either the Fed or Congress and the Administration take some action to stimulate growth. It is also said that philosophical differences will prevent that processes. Those observations are almost certainly true. Many agree that a new recession has started. It appears that the situation will have to become much, much worse before fear of an economic collapse prompts actions radical enough to address the emergency.
Douglas A. McIntyre
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