Category Archives: economic predictions

In 1978, Congress passed the “Full Employment and Balanced Growth Act”, which, in effect, expanded the reach of Congress beyond the use of just fiscal policy. The primary objective of the Act, also known as the Humphrey-Hawkins bill, was to add a second mandate to the Federal Reserve‟s policy goals. In addition to conducting monetary policy to achieve price stability, the Act directed the Fed to strive for full employment. During the last 30 years, policy makers have attempted to use a combination of monetary and fiscal policy to mitigate the natural ebb and flow of the business cycle. In the 25 years between 1957 and 1982 (300 months), there were 64 months that the economy was in recession.

[More...] In the 25 years between 1982 and 2007 (300 months) there were only two shallow recessions, which each lasted 8 months in 1991 and 2001. On the surface, it certainly appeared that the manipulation of monetary and fiscal policy had succeeded in taming the business cycle. In reality, the attempt to defeat the business cycle only succeeded in allowing far larger imbalances to develop. Continue reading →