The U.S. economy grew at a tepid 1.6% annualized real rate in this year’s second quarter, the government reported today. That’s down from the earlier estimate of 2.4% growth. The revised 1.6% rise is slightly higher than consensus forecast among economists, but there’s no getting around this uncomfortable fact: the economy slowed dramatically in Q2, falling to a 1.6% pace from 3.7% in Q1.
Daily Archives: August 27, 2010
THE BOTTOM LINE ON THE RISK OF A DEBT CRISIS
Arnold Kling hits the macroeconomic nail on the head with a very heavy rhetorical hammer:
…it would appear to be quite likely that the United States will
experience a debt crisis within the next two decades, unless the path for fiscal policy changes from what is projected by the Congressional Budget Office. However, international capital markets continue to treat U.S. Treasury debt as a fairly safe asset. One way to interpret this phenomenon is that investors expect the United States to take steps to get its fiscal house in order.
The assumption that the United States will have the political will to stabilize its fiscal position is based more on hope than on recent experience. If the political process continues to enlarge the government’s commitments to spend in the future, investor expectations will change at some point. That change in market perception is likely to be swift and severe.
WILL THERE BE A QE2? WILL IT MATTER?
Fed Chairman Ben Bernanke is scheduled to speak today at the Kansas City Fed’s annual Jackson Hole conference in Wyoming. Will he outline a new plan for monetary stimulus? If so, will the second wave of quantitative easing (QE2) be bold–bold enough to work? Or maybe he’ll just offer the same chit-chat that we’ve been hearing for months by telling us that the recovery is slowing and that nominal rates will stay low for an extended period.