The U.S. economy grew thanks mainly to consumer spending but it was well below the expected growth level of 8.4%
The U.S. economy is now bigger than before the pandemic hit – so why is the Fed still leaving ultra accommodative policies in place? After all – the economy, according to this data set is now fixed, isn’t it?
The U.S. economy grew rapidly in the spring and repaired most of the damage caused by the pandemic thanks to widespread coronavirus vaccinations and a nearly full reopening of the economy. And the economy continued to grow despite the rise in variant cases.
GDP for the economy grew by 6.5% annually in the second quarter. The size of the economy now exceeds pre-pandemic levels after a short but deep recession last year, the shortest recession in U.S. history. So why all the Fed caution still?
What now for the Fed?
The surge in growth gave the economy plenty of momentum heading into the third quarter, but the GDP is mostly a look at what was – not what is. It tells us where the economy has been, but not where it’s going.
The Fed remains on guard and continues to pump money in to the U.S. economy. The meeting concluded this week held interest rates at historic lows and no detail was given on tapering. The money tap is still fully open and the debt piles up!
Debt has to be re-paid – doesn’t it?
At some point and soon – this colossal debt will have to be attended to and that bill will land with you and me, the tax payer.
The effects suffered from the last financial crisis of 2008 in my opinion are still being felt and now this debt has been added to that burden.
Will the debt eventually crash the economy? Or will the Fed keep propping it up? Or more to the point – how long can the Fed maintain the cheap money flow?
Something has to give way…