Fed today: “fiscal policy is restraining economic growth”
That is all.
FRB: Press Release–Federal Reserve issues FOMC statement–May 1, 2013.
Cross-posted at Asymptosis.
Relevant and even prescient commentary on news, politics and the economy.
Well duh
Of course, now the monetarists, formerly content with their false notions that monetary policy was working just fine in lieu of fiscal expansion, are now wanting the FED to step on the gas.
This was an email conversation I just had with Warren Mosler:
[ME] Hi Warren, hope all is well.
Regarding your post “Double dip- this time it’s different” I might add that we are running a budget deficit of about 5%, but we have a trade deficit of 3%. To me that means we are only running a budget deficit of 2%, as the trade deficit is a drain.
[WM] right, the domestic sector is only ‘savings’ at a 2% rate.
[ME] I understand the benefits of trade, but still a current drain that needs to be offset by 3% of GDP deficit. We probably need a budget deficit of at least 8% of GDP to keep things moving marginally.
[WM] sure seems like it!
[ME] In 2008, we had a huge CAD of 6% of GDP and the budget deficit was just over 1% of GDP, probably exacerbating/triggering the 2008 crisis
[ME] Thoughts?
[WM] agreed! all in, the approx 1% deficit in the 2006-2008 period wasn’t enough to support the credit structure.
best!
Original Post by Warren:
we read you downunder