Monday, August 9, 2010

Phil Flynn: What Is The Poor Fed Going To Do Now?

What is the poor Fed going to do now? Despite the Fed best efforts the Jobs report was a dismal reminder that the economy and commodity prices still need some help. As nonfarm payrolls fell by a larger than expected 131,000 last month the odds that the FED instead of reducing its balance sheet and hang onto some of that paper money that they created out of thin air will instead begin to reinvest that money or put it back out in the market place. The goal is to try to inspire some type of economic enterprise.

Despite the signs of some rebound in the economy new health care programs and new financial regulation bills are leading to uncertainty and economic immobility. The Fed worried about another deflationary spiral that had seemed to be gaining momentum as the market anticipated a reduction of the fed balance sheet. The Fed fears that if they start to remove this stimulus that then it is possible that this nascent recovery make roll over and die.....Read the entire article.

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