Federal Reserve policy decisions, although only a small step quantitative easing, but non-conventional monetary policy “out” a major step in the process – but is a step backward: it means that previously well-planned “exit strategy” has been completely reversed, Bernanke’s Fed is being waged under the leadership of a Japanese-style economy to avoid the tragedy of the currency in the United States staged war of defense.

Japan, the U.S. economy is in the path of economic “stagnation of 20 years,” mistakes? It seems alarmist, but this is the current troubled Fed officials worried about a major. By the end of July, St. Louis Federal Reserve President James Bullard branch published a highly controversial academic articles, directly that the current Federal Reserve monetary policy may be to the U.S. economy into the Japanese economic plight. Brad believes that the U.S. economy than any time in history, closer to the trap of deflation in Japan, and a sense that this situation is caused by the Federal Reserve’s monetary policy, as the Fed continued commitment to “a considerably long period of time “maintaining” a very low level of interest rates “, which to a considerable extent, for increased public expectations of deflation and weak growth, sustained for several months down the core inflation data has proven this point. Under such circumstances, Brad believes that the Fed’s policy focus should be firmly from the interest rate to “quantitative easing”, which is coded to buy more long-term bonds. Although Brad does not say in the paper, but his implicit assumption that the Fed monetized by way of debt, artificially creating inflation, which will push the U.S. economy from the abyss of deflation. This article both inside and outside the Fed caused a great response. Not only because Brad has a well-known economists and Fed policymakers dual identity (Brad current Federal Open Market Committee with voting rights), but also because this article just published in the July 21 semi-annual monetary policy report After congressional hearings.

Bernanke, in testimony that the U.S. economic growth prospects will be “unusually uncertain”, which is also the market for the first time realized that the Fed may return to quantitative easing in the near future.

However, from recent economic data, concerns about Brad seemed exaggerated. The latest core CPI (7 months) rose 0.9%, growth of 0.1%; the core PCE (6 months) rose 1.4%, growth of 0, generally flat or slightly below market expectations and the expectations, but far from the deflation stage. From the August 10 minutes of the meeting of view, FOMC members of the Conference of the price level only a passing expression, cognitive slowing the trend of inflation was almost unchanged. So, what factors have led to the Federal Reserve determined to change its policy stance?

In fact, in August’s interest-rate meeting, the Fed’s economic outlook is not the most important statements the price level, but in the slower growth: “Economic recovery in output and employment have slowed down,” “The recent economic recovery may be weaker than expected “, which is the Fed’s fundamental growth prospects for the future to judge. In January 2010 the Open Market Committee (FOMC) meeting minutes showed that Fed on 2010 and 2011, the actual GDP growth forecast of central tendency were 2.8% -3.5% and 3.4% -3.5%, while unemployment Prediction of central tendency of 9.5% -9.7% and 8.2% -8.5%. Now the first two quarters of GDP expanded at an annualized rate of only 2.7% and 2.4%, significantly lower than expected; With the end of this inventory cycle tends, business investment will slow down the high unemployment rate will continue to restrain consumption growth, annual economic growth rate is likely to reach the Fed’s expectations. More importantly, the current sustained economic growth in the government under the fiscal and monetary stimulus to achieve. According to the U.S. Congressional Budget Office estimated in 2009, total 787 billion U.S. dollars the Obama administration’s fiscal stimulus plan to bring the 2010 contribution to GDP growth from 1.5 to 4.2 percentage points. Even under the most conservative method, the short-term effects of fiscal stimulus should be accounted for more than half of this year’s growth, not to mention the continued weakening of the fiscal stimulus effect, the prospects for future growth is more worrisome.

The Fed and Bernanke speaking, to avoid the last century, a repeat of the Great Depression 30 years certainly contributed, but the U.S. economy onto a path of sustained recovery is the real tough challenge. Currently, within the Fed’s estimate of potential real economic growth rate of about 2.75% -3% in between. Nearly 3% economic growth is the Fed in early development of “exit strategy” when important prerequisite. It now appears that this is no doubt overly optimistic growth expectations.

So whether the U.S. economy a “second bottom (Double Dip)” do? This is a very popular present an argument, but it means that the U.S. economy back to recession, the unemployment rate to move back to stocks of large-scale re-start. Obviously, the likelihood of short term this is not high. In the July 21 congressional hearing, Bernanke made it clear that the “second bottom,” almost impossible.

However, it will appear the third situation? That is to maintain economic growth below potential, but the actual level of sustained growth, full employment difficult to achieve, output gap is difficult to Su Xiao; Fusu into one kind of “L Xing” status, is difficult to Huidaoweiji to the growth levels? Economic data from the past two months, the U.S. economy has shown is that such a state.

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