"Now some economists thought the Fed might act on lower job numbers, But as our employment commentator Hugh pointed out in his assessment of the latest jobs report, May in fact is typically one of the best months of the year for job growth, and it was just not good enough. And that’s before you get to the fact that the taper talk alone has goosed some key rates, most important, mortgage rates. Admittedly, as we’ve also discussed, that could lead to a short-term buyer rush to lock in mortgages now, but that’s simply pulling housing demand forward and would be reflected in relative weakness later in the peak selling months even if rates stayed flat."
"This is all having a 1937 or a 1997 feel about it. In both cases, the authorities (in the US in 1937, in Japan in 1997) talked themselves into thinking that stimulus had gone on long enough, that the economy was enough better, therefore it was time to take the foot of[f] the pedal. In both cases, the economies went into reverse pronto. Now this time around, the result is likely to be less dramatic, at least in the US, because we’ve got more automatic stabilizers and the severity of the crisis, and the degree of overt stimulus, was vastly less than in our Depression or in the early part of the lost decades in Japan. But we are nevertheless cutting Federal spending prematurely. As we’ve discussed, when you have the business sector net saving (as it did even in the last expansion) and you have households saving (which they do in aggregate; a few quarters in the early 2000s were noteworthy departures from this long-established norm), and you are running a trade deficit, you NEED the government sector to run a deficit, or the economy contracts."
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