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Tuesday, July 3, 2012

All is Quiet on the Federal Reserve Front

English: President Barack Obama confers with F...
English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)
Another quiet week at the Federal Reserve. This month was very similar to last month…and the month before…and so on. In terms of monetary policy the Fed is doing very little. There seems to be very little the Fed can do at this time. The economy is still growing…but is growing quite slowly.  The recently revised figure for real GDP growth stands at 2.0 percent, year-over-year. In terms of the state of the economy, the Fed can do next to nothing to get the economy growing faster before the Presidential election.  President Obama…what you see is what you get!. Chairman Bernanke and the Fed stands ready to act if things go south.  Again, there is very little the Fed will be able to do at this time before the election, but, if the economy begins to get worse, the Federal Reserve is prepared to do something to show that it is “on the watch.”  That is the least it can do to help the sitting President. And, the Federal Reserve continues to keep an eye on the banking system.  I continue to interpret the stance of the Federal Reserve as one that aims to preserve the health of the banking system. I still believe that the banking system is not that healthy.  Therefore, in my view, the Fed continues to keep the banking system “well liquefied” so as to allow the banks to work out their asset difficulties as smoothly as possible.  The banking system continues to shrink due to bank closures and through consolidating acquisitions.  The FDIC is doing a very good job in overseeing the reduction in the number of banks in the banking system.... Continue to read.
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