Tuesday, April 08, 2008

Fed Sees "Severe and Protracted Downturn"

Minutes from central bank's last meeting show fear of 'severe and protracted downturn'
Some members of the Federal Reserve are worried about the possibility of a "severe and protracted downturn" in the U.S. economy that could last into next year, according to the minutes of the central bank's latest meeting released Tuesday.

The Fed said its staffers now expect the nation's gross domestic product (GDP) to shrink in the first half of this year, the clearest signal yet from the central bank that its members think the economy could be close to entering a recession -- if it hasn't already. Many Fed policymakers indicated that a downturn in the economy in the first half of the year "now appeared likely."

The minutes from the March 18 meeting show that some Fed policymakers are concerned the problems in the "housing sector had deepened and that considerable uncertainty surrounded the outlook for housing."

The release of the minutes come a week after Fed Chairman Ben Bernanke said during Congressional testimony that a "recession was possible." He also said that real GDP might grow slightly in the first half of the year but conceded that it could also contract.
It is nice to know that the Federal Reserve is finally catching up to the American public who have known for some time that things were getting very bad out there.
"Several participants noted that the problems of declining asset values, credit losses, and strained financial market conditions could be quite persistent, restraining credit availability and thus economic activity for a time and having the potential subsequently to delay and damp economic recovery," the Fed said.
I am sure whatever recovery happens will be at the corporate level and the middle and lower classes will continue to burden the brunt of the downturn. It will be yet another jobless recovery. The Federal Reserve will continue to cut rates which will in turn place even more pressure on the already depressed dollar. That will only cause higher commodity prices and even higher oil prices but hey the corporations will once again make record profits but you will need a full time job just to afford the cost of commuting to work.

If people vote for more of these insane plolicies that have driven us to this point then they deserve the financial ruin that is sure to come as a result.

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