The Fed will use these power tools during the next big recession

Summary: Six years after the recession ended, we are due for another recession. Many experts say that the government is “out of bullets” to fight the next severe downturn. That’s quite false because 2008 marked the start of a new era in which our leaders manage the business cycles using strange and awesome tools. We’ll learn the long-term effects of these tools slowly, probably only decades later.  {2nd of 2 posts today.}

“All is not lost until you run out of airspeed, altitude, and ideas.”
— Pilots’ wisdom.

Frankenstein
Roger Bart and Shuler Hensley (on table) in the musical “Young Frankenstein” at the Hilton Theater.

(1) Expect the next recession

Free market economic systems produce greater growth than any other system yet tried. Business cycles — and recessions — are a price we pay for the growth. They’re unpredictable — literally so (the consensus of economists has never predicted one). They can destroy years of growth, and change the course of nations. The 2008 crash did both, as shown by this slide from a typically excellent analysis by Brad DeLong.

See the full post at Wolf Street!