CHICAGO – Economic growth in the United States seems to be slowing again. This might reflect temporary factors, like the Japanese tsunami, which disrupted supply chains and caused some factories to suspend operations. Also, high oil prices have taken a toll on disposable income, impeding growth in consumption demand. This has led to a build-up of inventory – and thus to cuts in production.
Recoveries are rarely without blips, especially when they are as weak as this one. But, regardless of whether the factors behind the latest slowdown are fleeting or enduring, there will be calls on the US Federal Reserve to do something.
Some Americans view Fed Chairman Ben Bernanke as a modern-day wizard, able to revive the economy through a swish of his monetary wand – first ultra-low interest rates, then quantitative easing, and perhaps eventually money-printing. If inflation is low, they want the Fed to use every spell it knows to revive the economy. Like the World War I generals who reacted to every slaughter of their men by sending even more over the top of their trenches in a vain attempt to overwhelm the enemy, “free money” types react with “More!” if their policy does not seem to be working.