PowerTalk: What You Need to Know as the Fed Gets Ready to Taper its Stimulus: Advice from Experts Douglas Holtz-Eakin and Diana Furchtgott-Roth
Ever since Fed Chairman Ben Bernanke hinted that the U.S. central bank could begin tapering its stimulating efforts, volatility returned to the stock market. There has been much discussion about when and how the Fed will deal with the sugar stimulus-addicted economy. The concern is if the Fed acts too quickly, much like a child on too much sugar, it will crash. This concern has led to the return of volatility to the stock market during the last several weeks.
My view, which I discussed this past weekend when I appeared on The Wall Street Report and advised subscribers to PowerTrend Profits and ETF PowerTrader, is that the Fed is not likely to taper near term. Data collected during the last few weeks and as recently as earlier this week confirms the U.S. economy once again has entered yet another spring swoon. Just yesterday, the New York Fed’s own Empire Manufacturing Survey for June boosted the case for no near-term tapering:
- “The new orders index slipped six points to -6.7, the shipments index fell twelve points to -11.8 and the unfilled orders index fell eight points to -14.5.”
- “Labor market conditions worsened, with the index for number of employees dropping to zero and the average workweek index retreating ten points to -11.3. Continuing the trend seen in the past few months, indexes for the six-month outlook declined, suggesting that optimism about future conditions was weakening further.”
That situation doesn’t paint a pretty picture. While it is easy to get overly downbeat, as I’ve shared with subscribers to PowerTrend Profits, there are pockets of strength in the economy.
In one of this week’s two PowerTalks, Douglas Holtz-Eakin and I talk about those pockets of strength, as well as what can be done to help stimulate growth further without adding to the debt burden that we are increasingly putting on further generations. For those not familiar with Doug, he’s president of the American Action Forum and recent commissioner on the Congressionally chartered Financial Crisis Inquiry Commission. Prior to that, Doug was the chief economist of the President’s Council of Economic Advisers from 2001-2002. As you’ll hear, he’ll share his view that there is much to go in the auto and housing rebounds, and the need for a tax overhaul if we really want to jumpstart the U.S. economy.
Weighing in on that last point and others is Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute for Policy Research, as well as a contributing editor of RealClearMarkets.com and a columnist for the Washington Examiner, MarketWatch.com and Tax Notes. Diana and I touch on the downside of more regulation, as well as how the government’s role in backing certain companies and technologies like those found at Solyndra practically almost guaranteed their failure. It’s also why Diana says the Affordable Care Act is “built to fail.”
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