EconomicCrisis.US

The U.S. economy’s recovery is likely to be slow, and the outlook is for stable inflation, Federal Reserve Bank of Chicago President Charles Evans said Thursday.

While leaving current monetary accommodation in place too long could fuel inflation eventually, removing it prematurely could “choke off recovery,” he said the prepared text of a speech in Chicago.

“I anticipate that restrictive bank credit, along with business and household caution, will continue to restrain the recovery’s strength,” Evans said. “Inflation will remain relatively stable.”
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In response to Pat Mikenatic’s letter: Yes, the recession is over. The general definition of a recession is “two or more consecutive quarters of negative economic growth.” The economy has grown in the past two quarters. By definition, the recession has been over for eight months and we are in a recovery.

He says that Austrian school economists know that this recovery is a bubble because of fiat money. No, they might think that. They don’t know it. He also claims that Von Mises disproved Keynes. No, Von Mises disagreed with Keynes.
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With shelter costs dropping sharply, U.S. core consumer prices fell a seasonally adjusted 0.1% in January, the first measurable decline since 1982, the Labor Department estimated Friday.

Core prices, which exclude food and energy costs, are considered a good indicator of underlying inflationary pressures. In January, prices fell for hotel rooms, home ownership costs, new cars, airfares and clothing.

Overall, the consumer price index rose a seasonally adjusted 0.2% in January for the fifth straight month, the Bureau of Labor Statistics said. Higher energy and medical costs more than offset the largest decline in services prices since 1982. Read the full report on the BLS website.
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Summary

President Obama’s proposed reform of US banks has not received universal acclaim. In particular, the UK government’s response has been rather lukewarm. What I think we are seeing are different responses to the same short term political challenge, ie bank bonuses that laugh in the face of suffering tax payers who have made the continued payment thereof possible. US and European (well, British) responses to this challenge are very different. They risk damaging consensus on global banking reform.
Analysis

President Obama signalled a significant change in direction last week, with his proposals to limit the activities of banks. He had previously shown little appetite to interfere with the structure of US banking groups, but simply identify those activities posing the greatest risk and use regulatory and market solutions (eg increased capital requirements) to increase control and/or decrease risk.
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