Recently I attended a meeting of economists from research centers around the country. Aside from the comments about government shutdown, the buzz is really all about the very uncertain economic and policy conditions the U.S. now faces.
There is widespread worry that we might be in the midst of a second economic slowdown since the recession. The first of these, which happened last year, seems to have been at least partially remedied by the Federal Reserve’s massive purchase of assets known as quantitative easing, the most recent of which was accompanied by a marked short-term improvement in the economy. That improvement seems to have run its course.
Over the past few months, labor markets have stalled; and, despite the Fed adding $85 billion a month through asset purchases, inflation appears as distant as ever. Something remains terribly wrong in the U.S. economy, and it defies easy explanation; but there are some tantalizing hints.