When I look at the overall economic situation, I can’t see that the Fed’s policy of monetary easing and keeping interest rates at historical lows did what it was expected to do — facilitate the banks’ move to productive lending money again.
I’m not criticizing the Fed because it didn’t have much choice in doing what it did. That was before we were facing the realistic threat of a second U.S. depression. Because of that, we saw the same horrifying experience in most of the rest of the world.
Without any doubt the Fed succeeded in doing that. But I don’t know if it will be able to avoid a “double dip” recession.
That said, it’s also a fact that, for now at least, Main Street doesn’t feel and think like Wall Street and it hasn’t regained the confidence it had in the Fed and in the economy, in general.
As I said before, this crisis found its roots in over-leveraging, out-of-control financial engineering and a real estate boom in the United States. We will not return to sustainable growth until the mess of de-leveraging, real estate, and financial engineered toxic waste that, by the way, is still in big numbers on the banks’ books, have been sanitized.
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