Fed's Yellen Hints at Recession, Rates Uncertain

Source : Reuters

"For the second time this week, a senior Federal Reserve official conceded the United States economy could slip into recession, but suggested the central bank should wait to see if more rate cuts are needed.

"The economy has all but stalled and could contract over the first half of the year," San Francisco Federal Reserve President Janet Yellen, who is not a voter on the policy-setting committee in 2008, said on Thursday.

"Current indicators suggest that, starting in the fourth quarter, the economy, at best, slowed to a crawl," she said, adding later that the Fed is still battling a "negative feedback loop" of tight credit conditions, falling house prices and low consumer confidence."

Wonder who's trying to convince whom. Somehow the fed seems to be trying to say, we "could" slip into a recession. Most experts believe we are already in one and the only thing that seems to be debatable is whether we meet the classical definition of a recession - it's merely academic and theoretical at this point in time. The important question is ... when does the fed let capital markets function - they'll start functioning at some point when artificial back stops are gone - injecting massive amounts of liquidity isn't going to address some of the problems - bailouts are not going to make the problem go away either - excess has gotten built-up into the system and has clogged all of it completely - the recession will help in rationalizing and justifying getting rid of some of the excess in a very short order of time.