Federal Reserve Bank speaker predicts economic recession has likely ended

SCSU alum and president and CEO of the Federal Reserve Bank in St. Louis, James Bullard said the recession has likely ended at a presentation in the Atwood Theater Friday.

The theater was nearly full as James presented his views on the economy.
Bullard’s presentation covered most of the contributing factors leading up to the recession. 

It showed that oil prices peaked higher in 2008 than they did in 1981’s recession. 
It also showed what hit the consumers the most, which was the home index price.

The presentation showed the home index price has turned around at the beginning of July of this year.  The home index price is the price of housing in the U.S.

According to the graph, initial unemployment has also fallen in the past few months. 

Bullard said that he was confident unemployment would not hit the 1981 level of 10 percent.

The graph also showed the levels of the financial stress for the markets, having them peak at five percent stress and taper down to two percent current rates. 

Bullard said that two percent was the extreme for financial stress before the recession.

Bullard said the core issue is to stop the Federal Reserve from having to bail out large investment firms. 

“These investment firms are like lumbering giants, and when they fall, they hurt all of the market,” Bullard said. 

He also mentioned that the banks were not necessarily too big to fail, but they were too big to fail quickly.

During his presentation, Bullard said that the $1.5 trillion bailout had tripled the U.S. monetary base.  He said that he and other economists were worried about the impact this would have on medium term inflation.

Medium term inflation is the loss of the purchasing power of the dollar over a medium period of time caused by an expansion in the amount of money in the economy.

Bullard’s presentation had a couple of plans laid out to lower inflation caused by putting liquidity in the markets. 

Among the plans were near zero interest rates and asset buying.  Bullard didn’t go far into details as to how these plans would work out.

When asked about the depreciation of the dollar bill due to inflation, Bullard said he would not comment on the value of the dollar but did agree that it has depreciated.

Bullard said that the inflation for consumer goods was at an unofficial one and a half to two percent.  He said that trends show that the short term inflation for consumer goods could possibly slow or stop.

Bullard’s presentation showed that “shadow banks” were another major factor leading to the bailout.

“Shadow banks are bank-like organizations that look and act like a bank, bur are not necessarily a bank,” Bullard said.  He said that these groups had a major expansion before the recession and had little to no regulation. 

He said a key factor to stop another recession from happening was the regulation of such groups.

During his presentation, Bullard said that in order to stop another recession, he felt that the federal reserve should have more control over the financial decisions of the United States.

Bullard’s presentation showed countries that were not impacted by the global recession.  These countries included China and India.

Bullard said that China was not hit by the recession because it was importing technology from the west in order to expand.  He also projected that when China was fully developed, it would be four times the size of the U.S