Analysts were discouraged- could delay Fed’s drive to reduce pace of bond buying Fed’s Decision 9/18/13 o Why did Fed decide to keep interest rates low? 9/18-19 The Economy Economic projections indicate weak GDP growth in 2013, 2014 Unemployment too high Fed wants more evidence that the recovery will be sustained Fiscal Policy (Congress & the President) To raise the debt ceiling or not— If congress decides to increase debt ceiling o Could imply concessions have to be made o Decrease G (government expenditures) If congress does not increase debt ceiling o Going to be a govn’t shut down o All non-essential services will be suspended and govn’t will be late with social security payments, retirement benefits, health care payments o Interest payments will be paid on debt Debt ceiling issue implies the economic recovery from Great Recession could stall, meaning GDP growth will decrease (slow down) o What will keeping interest rates low do?
Stimulate consumption & investment spending so firms will increase production and higher more workers— unemployment will fall Roughly how much National Income has been lost since the financial crisis of 2008? Refer to “Lost Output Clock” in real time. o 4.8 trillion o Lost output = jobs lost, bankruptcies, home foreclosures, business closings Roughly how much is national debt? o 16.9 trillion What is current debt ceiling? o 16.699 trillion How fast did the US output grow in the second quarter of 2013 o Increased at an annual rate of 2.5% instead of 1.7% estimates o Released by BEA- Bureau of Economic Analysis o Analysts were encouraged o Greater strength in US exports and slower increase in imports o Could make the Fed more confident in their plan to reduce their monthly bond purchases Obama wants to raise the minimum wage to $9 o Arguments for raising MW Move poor Americans above poverty line ($15,000) Increase spending on goods and services Would reduce worker turnover costs & raise worker productivity Will keep up with inflation o Against raising MW Firms will higher fewer workers Firms will increase their prices Workers will be replaced by machines