1929 Redux?
My partner, Scott DeWolf, sent me this link the other day and I've been traveling and have not had time to stick it up on the blog. It is an interesting news story (now a week old) picking up the comments of Joseph Stiglitz, a Columbia University professor and 2001 Nobel Laureate. In the article, Stiglitz predicts that it is at least possible that the current economic downturn could be the worst the country has seen since the Great Depression. As the article explains:
"[Stiglitz] explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.
Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it."
It is probably worth noting that the Fed cut interest rates yet again on April 30th. (Making this blog entry somewhat timely). That brings the federal funds rate to 2%. Interestingly, the Federal Reserve also hinted that no further rate cuts would be forthcoming. At least for now. Perhaps a signal that the Fed has truly "used up its ammunition" or is running perilously close to being empty.
