Sorry, apparently my last post didn't take the link to the article. I had an article and tried to post it with the hyperlink, but I guess it didn't work. I didn't make up that information.
For today, this article explains how the Fed is forecasting a good year of growth for the economy, but the unemployment rate will remain high. At the rate they are suggesting, it will be the biggest growth since 2004. The $600 billion stimulus plan was still voted unanimously to continue to help spur growth. Yet, some people are worried that this stimulus plan will cause high inflation in the future. People are still skeptical about the huge funds that are being used that increase our deficit, worrying that a huge inflation is on the way. To help with this, the Fed is thinking about raising interest rates. What are your thoughts on the plans the Fed has proposed? Are these necessarily the best ways to handle our frail economy? There are many external pressures that are pushing the Fed from all directions to improve several areas of our economy so the worst doesn't happen again.
This kind of forced growth, specially the Fed policy, can set the ground for future bubbles and is usually quasi-growth - unsustainable. I think it will cause demand push inflation to rise since it seems like one measure of the growth is increased consumer spending.
ReplyDeleteProfessor M--The stimulus money increase aggregate demand, correct? Inflation would increase, but in the long run everything would balance out. How would increasing interest rates would affect the philips curve?
ReplyDeleteI agree with the unanimous vote that the $600 billion stimulus plan will spur growth, but I'm not sure if this is the best way to go about things. I agree with JJ, that forced growth like this will create inefficiencies and unsustainable growth in the long run.
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