Wednesday, January 13, 2010

Fed survey fails to state the obvious

"A new Federal Reserve survey, released Wednesday, underscores the duality of the economic turnaround: even as the economy grows and the recovery extends its reach geographically, more than 15 million people remain unemployed."

The obvious being, that the economy is growing yet fewer people are participating in the wealth. Call it Obama's "wealth flow to the top." This is a recipe for social disaster if left unchecked.

The Fed also noted:

"...although "economic activity remains at a low level, conditions have improved modestly further." However, the Fed also noted that "labor market conditions remained soft" in most of the Fed's 12 regions as the new year started."

Could it be that Bernanke doesn't understand that there is no direct link between monetary policy and aggregate demand? Only fiscal policy can address this, yet Bernanke has publicly spoken out against deficit spending, so neither he nor any other Fed members be should surprised that economic activity remains at a low level.

1 comment:

Matt Franko said...

do you know if there is an identity concerning non-govt sector growth vs total bank credit. ie Can the non-govt sector have growth if total bank credit is decreasing?

From looking at fiscal, it looks like the govt sector will at least break even on growth vs last year, but can we reasonably expect non-govt sector growth if credit continues to shrink?

I remember your equation:
GDP = private consumption + gross investment + government spending + (exports − imports)