A Quote by Mark Zandi
An overheating economy, characterized by accelerating inflation and rising interest rates, is another precondition for recession. This doesn't describe today's economy.
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Mr. Greenspan did a very good job in the early 1990's. But recently he's fallen prey to this crazy theory that prosperity causes inflation. So they're trying to slow the economy down by raising interest rates. It's like a doctor saying you're in great health, so we have to make you sick a little bit. It's a bizarre theory. It's going to hurt our economy.
A market that's as open as possible is the precondition for a successful economy, and a successful economy is the precondition to being able to pay for social security.
Low interest rates are a big opportunity for investment. But the issue is that this money should go to the real economy, not the financial economy.
It has been said that the Fed's job is to take the punch bowl away just as the party gets going, raising interest rates when the economy is growing too fast and inflation threatens.
At the center of every recession is a serious imbalance in the economy and mirrored in the financial system. Think subprime mortgage and the Great Recession, or the technology bubble and the early 2000s recession. There are no such imbalances today.
Throwing Ronald Reagan out of office at the height of his popularity, with inflation and interest rates down, the economy moving and the country at peace, would have required God on the ticket and She was not available!
Here's why I think the public service jobs are almost unavoidable: When we have downturns in the economy - and we will, for we haven't repealed the business cycle - unemployment will build, yet we no longer have any safety net. What are we going to do? Unless we decide to pull out all the stops and lower interest rates immediately and risk turning a recession into wild inflation, we're going to have to figure out some way of providing some more, not job security, but employment security.
Today it's fashionable to talk about the New Economy, or the Information Economy, or the Knowledge Economy. But when I think about the imperatives of this market, I view today's economy as the Value Economy. Adding value has become more than just a sound business principle; it is both the common denominator and the competitive edge.
Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in.
Central bankers always try to avoid their last big mistake. So every time there's the threat of a contraction in the economy, they'll over stimulate the economy, by printing too much money. The result will be a rising roller coaster of inflation, with each high and low being higher than the preceding one.
They talk about the economy this year. Hey, my hairline is in recession, my waistline is in inflation. Altogether, I'm in a depression.
Government intervention in the economy - through taxes, regulation and, most importantly, currency inflation - causes distortions and misallocations of capital that must eventually be unwound. The distortions degrade the general standard of living, and the economy goes into a recession (call that an incomplete cleansing). Or it goes into a depression - wherein the entire sickly structure comes unglued.
Although low inflation is generally good, inflation that is too low can pose risks to the economy - especially when the economy is struggling.
At times of recession, running a budget deficit is highly desirable. Once the economy begins to recover, you have to balance the budget. But it will also need additional revenues. Should the government not receive them, we will all get punished with higher interest rates.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
The risk is that as we come out of this recession, we'll have so much debt to finance, we'll either have to have inflation or very high interest rates to continue to borrow the money, or both. That's a risk.
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