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Federal Reserve Statement: Is No News Supposed to be Good News?

Posted by Larry Doyle on November 24, 2009 3:50 PM |

In the Uncle Sam Economy circa 2009, seemingly every meaningful economic development runs through Washington.¬† From housing to health care and finance to “you name it, ” the grand old man and his henchmen have their hands on almost every aspect of our lives. Getting smothered yet?

Against that backdrop, the Washington establishment dominates the news and has numbed the American public in the process. I witness this novocaine effect once again today with the release of the Federal Reserve’s Statement from its meeting on November 3-4.

While analysts pick over each and every word in this statement, do we truly learn anything new today? Assuredly not.

The Fed states:

Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

Having read and reread this statement to pick up minor nuances or subtleties in the Fed-speak, I detect little to no real news here. The fact is the economy remains horrific and the Fed will continue to flood the system with a fire hose of liquidity.

Given that there is no real news in this Fed statement, could we be so bold and say, “no news is good news”?

Now that would be a stretch, but it is one many in Washington and Wall Street don’t mind making everyday.


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