Recently, many pundits and bloggers have been raising the alarms on the reduction of credit in the economy, and the increasing risk of runaway inflation. However, as the recession fades and growth returns, the Fed clearly has an eye on inflation. As the Fed tightens, the economy would be predicted to grow very slowly. This opens the possibility that we face a double dip recession, as is being predicted by Nouriel Roubini.
Questions you might try to answer:
- Do you think the economy faces a high possibility of a double-dip recession? Focus on monetary issues here, but also consider fiscal issues. If not try to find some counter-factual evidence.
- As the economy improves, do you believe that the economy will return to a high-inflationary norm? Why or why not? What factors in the supply of money will play a role in this.
I would like your statements to be as subjective as possible, or in jargon terms, positive and not normative in nature. Also, remember, I want you to keep your descriptions short, basic, and related to classroom content. Read other students comments before posting, and please leave your name with your posting.