Fed Member Warns Of A Lost Decade

New York Times:

On Thursday, James Bullard, the president of the Federal Reserve Bank of St. Louis, warned that the Fed’s current policies were putting the American economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”

[. . .] Mr. Bullard had been viewed as a centrist and associated with the camp that sees inflation, the Fed’s traditional enemy, as a greater threat than deflation. But with inflation now very low, about half of the Fed’s unofficial target of 2 percent, and with the European debt crisis having roiled the markets, even self-described inflation hawks like Mr. Bullard have gotten worried that growth has slowed so much that the economy is at risk of a dangerous cycle of falling prices and wages.

It may be late, but if the Fed is prepared to understand the dire straits of the economy, that is welcome news. Now, if only the Congress and the President could join the battle to save the economy.

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    And about an hour later, Dallas Fed Pres Fisher (5.00 / 1) (#5)
    by steviez314 on Thu Jul 29, 2010 at 02:09:41 PM EST
    blamed Washington's "capricious" manner for drafting health-care legislation and other laws, which he said had forced businesses to the sidelines. "No amount of further monetary policy accommodation can offset the retarding effect of heightened uncertainty over the fiscal and regulatory direction of the country,"


    "We're done our job," he said of the Federal Reserve.

    Another reason to let Texas secede.

    Simply another person (none / 0) (#6)
    by Militarytracy on Thu Jul 29, 2010 at 02:13:54 PM EST
    part of the current financial religion who sees finance and credit as the engine of the economy and not a working middle class.  The fed is grease, but if you allow Wall Street to kill the middle class and be accountable for and to nothing and blow the whole engine......all the grease in the world will not make the bus go anyplace.

    That seems an improper statement (none / 0) (#7)
    by Big Tent Democrat on Thu Jul 29, 2010 at 02:17:26 PM EST
    from a Fed official, who are supposed to be apolitical.

    He's said it before. (none / 0) (#9)
    by steviez314 on Thu Jul 29, 2010 at 02:21:43 PM EST
    He's the biggest Richard of all the Fed Presidents.

    Who is apolitical? (none / 0) (#24)
    by Militarytracy on Thu Jul 29, 2010 at 05:15:12 PM EST
    I was told the military was?  Sort of but not really.  I was taught to believe that the Supreme Court was too.  We know how that goes now :)  The Fed during the Rubin Greenspan years....who are we kidding?

    Heh, was just thinking about a (none / 0) (#25)
    by Militarytracy on Thu Jul 29, 2010 at 05:21:22 PM EST
    line my husband uses in some advanced course curriculum he is currently working on.  He tried it out on me to see if I thought it was profound.  He says that our current military is our politics on a Kenetic level.

    You mean (none / 0) (#35)
    by BackFromOhio on Thu Jul 29, 2010 at 07:10:50 PM EST
    apolitical like Greenspan?

    That might as well have come (none / 0) (#11)
    by andgarden on Thu Jul 29, 2010 at 02:24:30 PM EST
    from a Republican Senator. Outrageous.

    If you ever wanted to convince me that the central bank must be under political control, statements like this would serve well.


    Ad Age posted an article this morning about IRS (5.00 / 1) (#10)
    by esmense on Thu Jul 29, 2010 at 02:23:43 PM EST
    expectations for employment over the next several years. The number of W-2s filed (they are filed for every employee on a company's payroll, including household workers) in 2010 fell 12.2% below 2009 (from 241 million to 211), but the IRS doesn't see things getting much better any time soon. "The agency projects out to 2018, but even by that point they don't see the number of W-2s recovering -- the 2018 projection is just 235 million. "This [data] is a major reflection of just how bad things are. You would have to go back to the 1930s to see a dip this big," said Senior Economist Cary Leahey of Decision Economics."


    Well, Americans can always go back to... (none / 0) (#22)
    by szielinski on Thu Jul 29, 2010 at 03:34:21 PM EST
    ...what they do best: Farm this vast continent so that everyone can be fed. Work and food for everyone!

    What, Agribusiness has no need of hundreds of millions of farm workers....


    The first thing to do is extend the Bush (1.00 / 1) (#3)
    by jimakaPPJ on Thu Jul 29, 2010 at 01:52:08 PM EST
    tax cuts for 10 years. Give business and consumers some stability and belief they won't be sending more money to Obama World.

    as Jimmie says to his guests (5.00 / 1) (#12)
    by NYShooter on Thu Jul 29, 2010 at 02:31:37 PM EST
    "watch this," then pretends to pull a firing pin from a grenade with his teeth, " look at the baby  seals jump at the sardines, lol, lol, lol)

    works every time, lol


    Baloney (none / 0) (#4)
    by Militarytracy on Thu Jul 29, 2010 at 02:02:11 PM EST
    Few in dire straits will be paying much in taxes.  They don't want to raise taxes on anyone like me......corporations have had enough corporate welfare, it is time to pay up and support the civilized infrastructure that makes everything they desire possible too.  One of the reasons why our national debt is blowing all the fuses are becauase of the Bush tax cuts...that did not create one single job, only made the rich richer and manage to now make the poor poorer.

    CBO revenue and expenses numbers (none / 0) (#14)
    by BTAL on Thu Jul 29, 2010 at 02:38:31 PM EST
    by presidency (averaged over entire term):

    Reagan:  Rev:  18.2T  Exp:  22.4T
    Bush I:  Rev:  17.9T  Exp:  21.9T
    Clinton: Rev:  19.1T  Exp:  19.9T
    Bush II: Rev:  17.9T  Exp:  19.9T
    Obama:   Rev:  16.1T  Exp:  24.6T

    This chart graphically illustrates in a year by year format.  The expenses spike (deficit/debt) did not occur until 2008/2009 which includes TARP.



    The Bush tax cuts and the Bush (none / 0) (#16)
    by Militarytracy on Thu Jul 29, 2010 at 02:44:51 PM EST
    created wars created an exploding deficit.  How is that you can't grasp the obvious?  What President handed George Dubya Bush surpluses and a robust ecnomy?

    Did you look at the chart? (none / 0) (#17)
    by BTAL on Thu Jul 29, 2010 at 02:59:48 PM EST
    The "surpluses" term is loosely used, not that if everything had been equal (tech bubble continued, 9/11 hadn't occurred) then those surpluses could have actually materialized as the CBO projected.

    The other point that many overlook is congress being the appropriators vs the executive.  The executive however always gets the credit or blame.

    GWB also dealt with the dotcom bubble recession that he inherited.

    I don't hold GWB nor the R congress blameless for some of their actions. However, the year to year CBO numbers in the chart do not show the tax cuts as being the major reason for the current deficit/debt situation.


    That's big of you (5.00 / 2) (#19)
    by Big Tent Democrat on Thu Jul 29, 2010 at 03:19:36 PM EST
    Not holding the GOP blameless.

    @19 You are welcome n/t (none / 0) (#26)
    by BTAL on Thu Jul 29, 2010 at 05:28:01 PM EST
    You are right (5.00 / 1) (#20)
    by lilburro on Thu Jul 29, 2010 at 03:29:50 PM EST
    it is the tax cuts and his stupid wars (chart).

    The CBPP is not the CBO (none / 0) (#23)
    by BTAL on Thu Jul 29, 2010 at 03:36:23 PM EST
    and regardless of their stated "Non-partisan disclaimer", they have their own agenda.

    Um, ok (none / 0) (#37)
    by lilburro on Fri Jul 30, 2010 at 11:47:54 AM EST
    hello FoxNews.

    Please stop interjecting facts (none / 0) (#18)
    by sarcastic unnamed one on Thu Jul 29, 2010 at 03:12:28 PM EST
    into the discussion.

    The dotcom bubble (none / 0) (#27)
    by Militarytracy on Thu Jul 29, 2010 at 05:39:26 PM EST
    Fricken hysterical :)  At best a blip, but Dubya couldn't wait to influence the SEC to be utterly useless and deregulate everything he touched.  Here we are now, and big business needs regulating but they scream their heads off at the first mention that it will destroy what is left of the economy.  It is such b.s. too.  They share nothing with anyone who isn't in the boardroom. It is all a scam anymore.

    Seriously, having lived through the tech (none / 0) (#29)
    by BTAL on Thu Jul 29, 2010 at 05:46:58 PM EST
    bubble immediately after my USAF retirement, it was even more free and loose money than was involved in some of the liar loan money in the housing bubble.

    There were millions and millions handed to people who had "invented" the latest animated gif.  Zero, zip, nada business logic behind the investments - the all powerful IPO was the manna from heaven.  And with all those millions was just as many McMansions, Mercedes and suckers.  

    At least in the housing bubble, there is still a physical asset that can be claimed.

    Yes, the dotcom bubble was real and did have a definite effect on the US (and world) economies.


    I remain unconvinced (none / 0) (#30)
    by Militarytracy on Thu Jul 29, 2010 at 05:50:25 PM EST
    Oh yeah, and I remember Clinton (none / 0) (#31)
    by Militarytracy on Thu Jul 29, 2010 at 05:54:33 PM EST
    attempting to stop the CEOs from looting everyone's 401k money that being kicked to all of them.  They screamed like the pigs they are, and waited for a better President.

    Under Clinton my spouse had to do a stint as the supply officer for his unit too.  He was up until 2 a.m. many times trying to figure out how to keep the unit mechanics stocked with the tools they needed under the budget he had to work with.  It wasn't easy, but he did it.  I remember the Clinton years very very clearly.


    I was also active duty and responsible for (none / 0) (#34)
    by BTAL on Thu Jul 29, 2010 at 06:19:23 PM EST
    budgets during the Clinton administration.  The major DoD issue during that time was the Gramm-Rudman-Hollings act.  We were squeezing blood out of stones.  

    Look, I don't mind being a dependent of (none / 0) (#36)
    by Militarytracy on Fri Jul 30, 2010 at 09:25:14 AM EST
    an accountable military budget.  And after Bush 2 got ahold of everything that went completely out the window in such a way that all I can say is it is shocking, utterly shocking.  And somehow we even sent bails of cash to Iraq.  Real bails of cash literally on pallets, that cannot be accounted for now.

    I respect your side of the issue (none / 0) (#33)
    by BTAL on Thu Jul 29, 2010 at 06:16:45 PM EST
    Both sides need to dial back the rhetoric and manipulation of their respective representations of the numbers involved.

    In relation to the dotcom bubble/revenues/expenditures I give Clinton and the congress he had to deal with kudos for what they accomplished. However, in good times with very loose money flowing, it is easier to pay taxes and capital gains with funny money.  He and Newt parlayed the situation to their political benefit regarding the federal budget.  Both were fortunate that they didn't have to deal with the resulting bubble pop.



    Not a deficit hawk are you? (none / 0) (#8)
    by Big Tent Democrat on Thu Jul 29, 2010 at 02:17:50 PM EST
    Jeez (none / 0) (#1)
    by lilburro on Thu Jul 29, 2010 at 01:27:25 PM EST
    it takes a long time for Paul Krugman's blog to get syndicated.  I think I read this months ago.

    many, (none / 0) (#2)
    by NYShooter on Thu Jul 29, 2010 at 01:39:34 PM EST
    many months ago.

    understandable, unsurprising (none / 0) (#13)
    by NYShooter on Thu Jul 29, 2010 at 02:36:25 PM EST
    If you know something about the psychology of Bullies & Bullying you know that the Bully's rage grows with every defensive squirm of the victim.

    Guessing game (none / 0) (#15)
    by vicndabx on Thu Jul 29, 2010 at 02:43:08 PM EST
    and maybe a little infighting amongst the Lords of the Dollar? Second Depression Averted Due to Bailouts: Study

    You know what is missing from the study? (5.00 / 2) (#28)
    by Militarytracy on Thu Jul 29, 2010 at 05:43:43 PM EST
    What if the banks had been taken over by the Fed and the toxic assets taken a haircut.  NO figures on that scenario :)  And I'm sure there is a reason for that :)

    This whole thing is essentially a big what if..... (none / 0) (#32)
    by vicndabx on Thu Jul 29, 2010 at 06:14:59 PM EST
    I believe there were better (none / 0) (#38)
    by Militarytracy on Fri Jul 30, 2010 at 12:30:16 PM EST
    choices that could have been made that would have preserved a lot more economic vitality than what we have now.  The problem with the banks was that they were all so insolvent they couldn't enough free money in fast enough to cover their insolvency before they began destroying jobs.  Once the job market fell under the scythe the whole economy is danger, and the still insolvent banks are forced to sit on huge piles of money because they must have something to balance the ledgers with with all the defaults they carry still on the books.  So more jobs will be destroyed in this cycling, which will lead to an even more unstable economy and more jobs lost.  IMO the only problem was that Wall Street didn't want all that B.S. they leveraged to come due, if it had though it would not have destroyed the job market like this and become one big vicious cycle if HOLC had also been enacted.  People would have had homes and solvent banks, we can grow with that.  But that is people growth and that isn't considered COOL growth on the beltway.  That is the unwashed masses getting bigger and more powerful and who wants that?

    How pleasing it is... (none / 0) (#21)
    by szielinski on Thu Jul 29, 2010 at 03:30:54 PM EST
    ...when a member of a loud and arrogant cargo cult experiences cognitive dissonance!