Tuesday, March 1, 2011

Stagflation. Feldstein: U.S. Economy Has Cooled, Bernanke Says Inflation

Bernanke says we have higher "temporary" infation, yet signs are everywhere that the economy is not good. This spells "stagflation".

Martin Feldstein, the Harvard University economics professor, says the U.S. economy has cooled at the start 2011, as consumers have reduced spending in light of  higher gas prices and a declining cash at the ATM, i.e, their houses.
“There is a mixed picture now in terms of how much the economy is on track,” “...started slowing down toward the end of the fourth quarter. The January numbers are not very good at all.”
“So this is not a strong economy,” “There hasn’t been a pull-through from the fourth quarter to the first quarter.”
“Higher- and middle-income people felt pretty good”  “They went and spent more money. But that doesn’t mean they will keep doing it.” He says this was because of higher stock prices.

The Harvard economist also said that congressional cuts in the U.S. budget won’t have much of an effect on economic growth: “plus or minus $30 billion or $40 billion [...] is not going to have a very substantial impact on aggregate demand and on GDP growth.”

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