EconomicCrisis.US

The Federal Reserve should start raising interest rates next year, a top Fed official said on Monday, arguing that even if rates stay near zero for many years, U.S. economic output will not bounce back to pre-recession levels.

Last month the Fed said it was likely to keep interest rates exceptionally low through late 2014 to bolster a recovery that was moving too slowly.

St. Louis Fed President James Bullard said he disagreed with that decision, arguing that the housing collapse means unemployment is likely to stay high and labor markets will improve only slowly even if rates are kept low for many years.
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At least three dozen money-market mutual funds were at risk of failing during the financial crisis, besides one that did end up collapsing, Moody’s Investors Service said Tuesday.

The report shows how shaky the nearly $3 trillion money-fund industry was after Lehman Brothers’ September 2008 collapse.

Around the time that a soured Lehman investment triggered the demise of the $64 billion Reserve Primary Fund, Moody’s says at least 36 other U.S. money funds were also at risk of “breaking the buck” — failing to ensure clients could get back at least a dollar for each dollar they put in.
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Is the U.S. economy in the early stages of a rare illness that last hit 80 years ago?

Because most of us have lived in an era of ever-rising prices, a full-blown bout of deflation would be a shock.

The United States has fought off deflation three times: in the Panic of 1837, after the Civil War in what’s called the Great Deflation and during the Great Depression in the 1930s.

Generally, a reduction in the money supply sparks deflation. Governments cut — actually cut — spending. Or central banks raise interest rates and drain banking reserves.
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The health and credibility of the U.S. financial system is basic to the functioning of the American economy, and the role and influence of that economy worldwide.

A comprehensive package of financial regulatory reforms voted out of the Senate Banking Committee is fundamental to restoring that credibility and rebuilding the strength of the economy.

The bill now before the full Senate moves the country one step closer, in the words of President Obama, “to passing real financial reform that will bring oversight and accountability to our financial system.”
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