Economic Commentaries

Entries for October 2014


In the midst of the Russian debt default and Asian financial crisis of 1998 then Fed Chairman Alan Greenspan asked rhetorically at a Jackson Hole symposium how long the U.S. could remain an oasis of prosperity. The answer was “not long” and during that fall the Fed eased credit. Now the same question looms as Europe slides closer to deflationary recession, parts of South America are in recession as is Russia, and measurable weakness is spreading across Asia.

From our perspective the current answer to that oasis question is again “not long” and from the latest FOMC notes a similar conclusion may be being reached. Yet the Fed is set to conclude its asset purchase program and debate within and outside the Fed is raging over the timing of raising short term interest rates. This debate seems wrongheaded.

Indeed, the spring-summer spurt in domestic activity is already showing signs of sputtering. The farm economy is in a recession. The equity performance of the cyclical airline and automotive sectors is poor relative to background indicators, suggesting weakness in the quality of demand. Housing construction and demand remain weak and evidence of a relapse in home prices is mounting as investor demand dries up and the first time homebuyer remains missing in action.

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