Happy Thanksgiving! Why is it that the U.S, Recovery is slower than the Rest of the World

It seems as though the U.S is on a much slower pace to recovery than other parts of the world. It may be that many people in general are beginning to learn about the Federal Reserve’s ways of “FIXING” the economy with low interest rate policies, which give those who save very little return on interest and give the illusion that borrowing is easy and affordable because there is more wealth available.  Even businesses, now aware of the dangers of a low inflation- sparked economic bubble, may clearly be refusing to fall for the age-old boom-bust trap.


Then again it could clearly be a lag effect that hasn't quite gone into work yet.  We clearly know the banks have yet to recover from their investment losses and with many homes and properties on foreclosure or short sale its a continued loss on their books just hiding within their balance sheets. For many buyers they have began to notice the hassle with dealing with banked owned homes.  The CPI has not changed significantly but its my prediction that as the PPI continues to go up companies will soon have to raise prices therefore costing us the consumer more.  With FED interests rate still remarkably low people may soon began to take risks with starting up companies and creating jobs.  My only fear is that if things do get better we as Americans will began to follow into the same mail invested traps as the past.  Causing even a larger economic downturn. It will be interesting to see how long interest rates remain relatively low.


Here is a brief article by Peter Schiff explaining his theory on why the Dual Mandate by the Fed doesn't even matter.  


http://www.businessinsider.com/debate-over-dual-mandate-2010-11

Humphrey-Hawkins Full Unemployment Act of 1977 (Full Employment and Balanced Growth Act)

During the 1970s unemployment and inflation levels began to rise, creating fears of an economic recession. In the past, the country's economic policy had been defined by the Employment Act of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with the private sector. Some Congressmen, dissatisfied with the unclear wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy…

The Act's sponsors embraced conventional Keynesian economic theory (our country’s favorite theory of economics), which advocates forceful government spending to increase economic demand by impacting GDP. In particular, Keynesian theory asserts that the government can minimize the distress of business fluctuations by compensatory spending, intended to sustain or inflate investment levels by government spending and promote long term growth with the economy.

Consistent with Keynesian theory, the Act provides four measures to create temporary government jobs to reduce unemployment, as was attempted during the Great Depression.

1.     Full employment

2.     Growth in production

3.     Price stability

4.     Balance of trade and budget.

Somewhat contradictorily, the Act also encouraged the government to develop a sound monetary policy, to minimize inflation, and to push toward full employment by managing the amount and liquidity of currency in circulation.  Overall, the Act sought to formalize (and to expand Congress's role in) the economic policy process, as governed by the Federal Reserve and the President.

- Unfortunately inflation and deflation of the money supply and manipulation of interest rates are the Federal Reserves only options to try to meet these strict requirements.  I’m not sure but these options don't sound like there meeting the long term goals of promoting consistent growth for the economy...

Free Lunch theory explained

After talking with a friend and looking over a highly debated question asked in his Economics class I thought it would be good to repost a popular video explained by Milton Friedman on the topic "Free Lunch" explaining there is no such thing as a free lunch.