They warn that deflation is a serious risk and that the U.S. could become another Japan, which must be avoided at all costs. Before this week’s FOMC meeting, The Wall Street Journal wrote that the Fed would add more stimulus into the economy – including the purchase of long-term treasuries. It turns out that reporter was remarkably prescient.
I share these concerns about our economy. Economic conditions are far from satisfactory, unemployment is simply too high, and we want a stronger recovery. But as much as I want short-term improvement, I am mindful of possible longer-term consequences of zero interest rates and further easing actions.