Personally and economically, the news coming from the Federal Reserve hasn't been very good recently. I still wonder why they rescinded the offer they made me over the summer, but moving on...
The current economic outlook is sustained high unemployment and a real possibility of deflation. Deflation and high unemployment will make life hard, especially for new graduates like me. Now I'm facing the dual reality of unemployment and rising costs of servicing student loans as the value of my debts increase, in real terms, if deflation actually materializes. Is anyone else worried? The fed isn't.
There's an intrinsic problem with regional Federal Reserve Banks (and the Fed in general) and that is the board of the regional banks are populated with bankers and industrialists. If I were a banker, I'd definitely be more concerned with creditors than with debtors... But unfortunately, I'm a debtor.
Strange News From the Federal Reserve:At current levels of unemployment, there is downward pressure on the rate of inflation. Unless the unemployment rate falls sometime in the next two years, it is more likely than not that the U.S. will be in deflation--and in that case the Federal Reserve's ability to stimulate the economy will be very small.
I would have thought that a desire to stay far away from the edge of deflation would have provoked more interest rate reductions by now. It continues to puzzle me...
--Brad DeLong