The Fed: Our economy's protector?

The American Thinker ^ | June 28, 2009 | Mikiel de Bary

[Scanian]

Some Wall Street analysts suggest investors now plan for "an economic recovery in a post-bubble environment." Encouraged by the recent stock market rebound, they are convinced the economic downturn will sooner or later be over but are worried about the strength of the coming upturn.

A New York Times writer frets that any recovery promises to be weak. According to him, "a sudden credit contraction" caused the downturn in economic activity. But the real start of the downturn was a dawning realization that asset prices, typified by home prices, were unsustainably high. This caused lenders to feel queasy and borrowers to think twice. According to the Times writer, however, somehow a credit contraction came upon us, applying a "chokehold" to the economy. The good news, he adds, is that the contraction has relented, but the bad news is that merely "...allowing a person to breathe may not be enough to restore him to health."

Let us just say it would be a good start. Still, it would be interesting to know exactly who now feels "allowed to breathe." Do the remaining executives at GM and Chrysler? (We won't mention the stockholders or creditors.) How about the nominal bosses at Citigroup -- are they getting the oxygen? How chipper are medical doctors after the Obama AMA speech, and how carefree the bankers, hedge fund managers or the so-called non-bank lenders after the Administration's new regulatory proposals? How easy is the breathing of Mr. and Mrs. Taxpayer as they contemplate record government spending plans and projected deficits?

We do all seem to be questioning the assumed recovery. When will it occur? How strong will it be and how long will it last? It seems especially problematic considering the universally acknowledged need for the Fed at some point to "reduce its balance sheet"

[Vaduz]

How about the nominal bosses at Citigroup — are they getting the oxygen?The people who receive the 50%pay inrease will.