Fed’s High Wire Inflation Fighting Effort Risks Triggering a Recessionary Fall

Imagine a high-wire act performed without a net.  That describes the Federal Reserve’s effort to curb inflation without crashing the economy.  Success will bring applause and relief; failure, a brief downturn, at best, with a prolonged recession the worst case outcome. 

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Have you seen the silly commercial, where the guy crawls through a swamp and emerges to announce that he has “found the Internet?” Well, we’ve crawled through a statistical swamp and found good news to report – quite a lot of it, actually. And, note the calendar – this is not an April fool’s joke.

The House of Representatives, as expected, approved the controversial bankruptcy “cram down” legislation, but not until after the bill’s sponsors agreed to add provisions making it more difficult for borrowers to qualify for judicial loan modifications. 

President Barack Obama has repeatedly rejected the stock market’s performance as a measure of his Administration’s efforts to repair the financial system and bolster the economy. 

In the 1950s, teachers told students to “duck and cover” in the event of a nuclear attack. We know now (and should have known then) that cowering under a desk would not provide much protection against radiation poisoning. But it may be a reasonable strategy for dealing with the continuing onslaught of dismal economic news. You certainly don’t want to spend a lot of time staring at the daily stock market reports or (even worse) reviewing the statements for your retirement account.