Fed leaders are starting to grapple with the risk that the recovery could stall altogether and that prices could even begin falling. In a deflationary spiral, like the one experienced by Japan in the 1990s, falling prices lead people to hoard cash, which weakens the economy further, and debts become even more onerous.
Most Fed leaders have said that is unlikely to happen in the United States. The officials, however, did say after their meeting that the "pace of recovery in output and employment has slowed in recent months." They added that the pace of the expansion "is likely to be more modest in the near term than had been anticipated."Most Fed leaders? Most Fed leaders? Perhaps the guy writing this isn't an idiot, but who think that we're entering a Japan deflationary style stagnation because of cash hoarding by individuals? (And what editor stuck that drivel in the beginning when the rest of the article is much more nuanced?)
America has the most spend-happy consumers in the world. We use our paychecks, 401ks and our houses to finance purchasing cool toys. Even bankruptcy is on the table if it cleans the slate and lets us purchase again.
And finally: newsflash! No one over here thinks that our announcements should goose the stock market. Stop creating a fake ruler to measure things by!
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