Economy Lost Momentum While I Was Pulling Weeds. Caroline Baum, Bloomberg.
In order to lose momentum, the U.S. economy has to have momentum to begin with. If it had any, I missed it.
What we had was a government-prescribed course of amphetamines (to keep it up), antibiotics (to prevent infection) and antidepressants (to make it feel better). It endured regular steroid injections from both monetary and fiscal authorities. And it still has no real muscle.
Inventory restocking isn't a strategy for long-term growth... Inventory accumulation accounted for more than half of gross domestic product growth in the fourth quarter, three- fourths in the first quarter and a little less than half in the second quarter.
The Federal Reserve’s near-zero percent interest rates and $2.3 trillion balance sheet, almost three times its pre-crisis level, haven’t translated into growth in broad money and credit. Banks are holding $1 trillion in excess reserves in their accounts at the Fed....
On the fiscal front, the government threw huge sums of money at the economy. It paid people to buy cars and homes. It paid them to weatherize their houses, maybe the same ones the government paid them to buy. It paid them to buy appliances for the houses the government paid them to buy. And it paid banks to modify mortgages....
There is no quick fix, no painless solution, for what ails the U.S. economy. It took a long time to accumulate enough leverage and bad debts to sink the economy. It should take at least as long to recover.
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