Real e Finance means business
Volcker Says
U.S. Mired in
Recession and
Inflation is
Coming..12.7.11
U.S. Mired in
Recession and
Inflation is
Coming..12.7.11
In a talk given to a small audience at the American Museum of Finance
on Wednesday evening, former Federal Reserve Chair Paul Volcker
stated that there was an ongoing recession in the U.S. and that we will
be seeing inflation in the future because of the actions of the Fed and
Treasury during the 2008 Credit Crisis.
While most of Volcker's talk centered on the current crisis in Europe, he
frequently made connections to what was going on in the EU to what
has taken place in the United States. His remarks about the U.S. being
mired in an ongoing recession were in response to a question on whether
an infrastructure bank would be a good idea. As part of his answer he
stated, "We're not going to end the recession in the next month or the
next year. It's going to take several years before the recession is over." The
U.S. government claims that the last recession ended in June 2009and
has repeatedly said that the U.S. has not fallen back into recession even
though unemployment and consumer confidence have continually
remained at recession levels.
When discussing the bailouts during the Credit Crisis, Volcker remarked
"people said that there will be inflation... that's true over time." Volcker
was critical of pro-inflation policies. He said that "the problem with
inflation is that it looks so enticing, but the historical record doesn't verify
that it is." He continued, "We would be very foolish if we deliberately
went out and created inflation." The Federal Reserve under Ben
Bernanke has kept Fed Funds rates around zero percent for three years
now, which means real interest rates have been negative. Negative
interest rates are highly inflationary as is money printing. The Fed has
expanded its balance sheet — one of the many ways it prints money —
by over $2 trillion dollars since September 2008.
Volcker described the 2008 Credit Crisis as a "regulatory failure", but
added "the Fed is only one regulator". He went on to state that "the
Federal Reserve took a lot of extraordinary measures" to handle events
back then and "the Fed and the Treasury did not necessarily follow the
letter of the law" in attempting to control the damage to the financial
system. Volcker further laid part of the blame for the Credit Crisis to
proprietary trading by banks and said he was "not in favor of banks
being speculative entities being supported by the U.S. government".
Paul Volcker was Chairman of the Federal Reserve from August 1979 to
August 1987 and is widely credited with bringing down the high inflation
of the 1970s by raising interest rates. More recently he headed the
President's Economic Recovery Advisory Board, which he left in February.
Disclosure: None
Author: "Inflation Investing - A Guide for the 2010s"
Daryl Montgomery
on Wednesday evening, former Federal Reserve Chair Paul Volcker
stated that there was an ongoing recession in the U.S. and that we will
be seeing inflation in the future because of the actions of the Fed and
Treasury during the 2008 Credit Crisis.
While most of Volcker's talk centered on the current crisis in Europe, he
frequently made connections to what was going on in the EU to what
has taken place in the United States. His remarks about the U.S. being
mired in an ongoing recession were in response to a question on whether
an infrastructure bank would be a good idea. As part of his answer he
stated, "We're not going to end the recession in the next month or the
next year. It's going to take several years before the recession is over." The
U.S. government claims that the last recession ended in June 2009and
has repeatedly said that the U.S. has not fallen back into recession even
though unemployment and consumer confidence have continually
remained at recession levels.
When discussing the bailouts during the Credit Crisis, Volcker remarked
"people said that there will be inflation... that's true over time." Volcker
was critical of pro-inflation policies. He said that "the problem with
inflation is that it looks so enticing, but the historical record doesn't verify
that it is." He continued, "We would be very foolish if we deliberately
went out and created inflation." The Federal Reserve under Ben
Bernanke has kept Fed Funds rates around zero percent for three years
now, which means real interest rates have been negative. Negative
interest rates are highly inflationary as is money printing. The Fed has
expanded its balance sheet — one of the many ways it prints money —
by over $2 trillion dollars since September 2008.
Volcker described the 2008 Credit Crisis as a "regulatory failure", but
added "the Fed is only one regulator". He went on to state that "the
Federal Reserve took a lot of extraordinary measures" to handle events
back then and "the Fed and the Treasury did not necessarily follow the
letter of the law" in attempting to control the damage to the financial
system. Volcker further laid part of the blame for the Credit Crisis to
proprietary trading by banks and said he was "not in favor of banks
being speculative entities being supported by the U.S. government".
Paul Volcker was Chairman of the Federal Reserve from August 1979 to
August 1987 and is widely credited with bringing down the high inflation
of the 1970s by raising interest rates. More recently he headed the
President's Economic Recovery Advisory Board, which he left in February.
Disclosure: None
Author: "Inflation Investing - A Guide for the 2010s"
Daryl Montgomery
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Economics Investing
Guide' is meant to help
educate people on how
to make profitable
current economic
environment. We have
coined this term to
describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is
the official blog of the
New York Investing
meetup.
Economics Investing
Guide' is meant to help
educate people on how
to make profitable
current economic
environment. We have
coined this term to
describe the current
monetary and fiscal
policies of the U.S.
government, which
involve unprecedented
money printing. This is
the official blog of the
New York Investing
meetup.
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