The Fed's Inside Look

Though it appears that the US economy is doing slightly better, the following quote released yesterday by the Federal Reserve sums up the concern:

"But the Fed was restrained in its own assessment of the economy. The recovery is continuing, 'though at a rate that has been insufficient to bring down unemployment,' the central bank said in a statement at the end of the one-day meeting, its last of the year. Consumer spending is increasing at a 'moderate pace,' officials said, adding it remains constrained by a jobless rate that's still nearly 10%."

Di Leo, Luca, Hilsenrath, 2010. Fed sticks to bond-buying policy. The Wall Street Journal, Dec. 14.

I think this is a reasonable appraisal. To date, Quantitative Easing II does not appear to have had much if any effect on inflation.

From an academic standpoint, the massive amounts of monetary and fiscal stimulus initiated by the Federal government, and the modest results in terms of recovery and economic growth, will give academics many years of research opportunities. I believe that the financial crisis of 2008 was a watershed event in the history of the United States and that without a return to the free market policies and fair trade policies there will be a prolonged period of economic stagnation.