Monday, February 22, 2016

My Favorite Keynesian Says: "The U.S. Economy Is in Good Shape"

Martin Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, a professor at Harvard and a member of WSJ’s board of contributors, writes:
The American economy is in good shape, better than critics think and financial investors fear. Incomes are rising, unemployment is falling, and industrial production is up sharply. The recent steep declines in the prices of stocks and junk bonds are not the precursor of an economic downturn...
Households are in good shape: Real disposable income is up at a 3.5% annual rate, and the total value of homes is 7% higher than a year earlier. The Congressional Budget Office and others predict that real GDP growth this year will be above 2.5%....T
Those who worry that the U.S. faces another recession often refer to the danger of an inverted yield curve—with interest rates on long-term government bonds below short-term rates. The danger reflects that, in the past, an inverted yield curve was the result of a sharp increase of short rates by the Fed to reverse rising inflation. But such a sharp increase hasn’t happened and isn’t likely to happen—even after the Fed raises short-term rates again. The yield on the 10-year Treasury note is now 1.8% while the two-year rate is 0.7% and three-month rate is 0.3%.
I have long contended that Feldstein is the best data watcher among Keynesians.



  1. That's good Robert. We all know how great Keynesian are at predicting/forecasting. Good to see that you and this guy are in agreement. So we should buy the dip!

    1. Well, if there is a dip. Oil is up 7% today, the Dow is up 200 points. BOOM.

  2. That's one day. How much more credit expansion can there be?