EconomicCrisis.US

From Enron to Madoff, bear markets to financial crises, bubbles to bailouts, jobless recovery to double-digit unemployment — this has been an economically brutal first decade for the new millennium.

It has bred doubt about the resilience of the American economy. It has stirred calls to dust off New Deal designs.

It has turned our world upside down.

After all, the 1990s were a jobs machine, a deficit destroyer, a stock market utopia. We even deflated the Y2K threat.

It seems now that all those zeros on our new calendars were trying to warn us about the encroaching fleet of financial Hindenburgs.
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The global financial crisis has challenged notions that monetary and regulatory policies should remain separated, but it’s not clear whether central bankers should target asset prices when setting interest rates, San Francisco Federal Reserve Bank President Janet Yellen said Tuesday.

“It is no longer obvious that setting policies to stabilize the economy on the one hand and to safeguard the financial system on the other can be cleanly separated — either in conception or implementation,” Yellen said, in remarks prepared for delivery to the Institute of Regulation and Risk in Hong Kong.
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When Nouriel Roubini talks, the world listens. Roubini is, of course, the once-obscure New York University economist whose dire warnings about a financial crisis proved depressingly prophetic. Last week, Roubini was shouting. Writing in the Financial Times, he warned that the Federal Reserve and other government central banks are fueling a massive new asset “bubble” that — while not in imminent danger of bursting — will someday do so with calamitous consequences.

Here is Roubini’s argument: The Fed is holding short-term interest rates near zero. Investors and speculators borrow dollars cheaply and use them to buy various assets — stocks, bonds, gold, oil, minerals, foreign currencies. Prices rise. Huge profits can be made.
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As the credit crisis ends, a bigger one is just beginning

“The US government has a technology, called a printing press… that allows it to produce as many US dollars as it wishes at essentially no cost.” – Ben Bernanke

The US economy contracted for four consecutive quarters since October 2008, something we have not seen since the Great Depression. A V-shaped recovery is simply not in the cards because the credit crisis has caused deep, systemic damage. Having said that, if the recession ends this year, it certainly won’t be because the global economy is healthy.
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