Podcast: Economic Turbulence, and a Call for Fed Action
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The United States economy can’t seem to catch a break. On Friday, the federal government lowered its forecast for fourth-quarter growth to 2.8 percent from 3.2 percent. In the Weekend Business podcast, Catherine Rampell explains why: the turmoil in the Middle East has sent oil prices soaring. Investors fear that the unrest will spread to other countries, further disrupting production. In the United States, major cutbacks by state and local governments and threats of federal cutbacks are throwing more workers into the unemployment pool. Taken together, the uncertainty means businesses are unlikely to invest, let alone hire more workers.
And it gets worse. Not only do rising oil prices mean more expenses for businesses, they affect consumers directly. Experts estimate that every extra penny consumers spend on higher fuel prices takes a billion dollars out of consumers’ pockets in a year. And that means they have less to spend on consumer goods, like televisions or cars, or on dining out and entertainment. The more worried they get, the more they cut back altogether — on everything. Despite the gloom, most economists aren’t ready to predict a double-dip recession. But they do expect growth to be painfully slow.
In an interview on the podcast, Christina Romer, former economic adviser to President Obama and now a professor at the University of California, Berkeley, tells Motoko Rich of The New York Times that the likelihood of inflation is so low the Federal Reserve should be more aggressive in stimulating the economy. In her column in Sunday Business, she offers some suggestions.
Also on the podcast, Janet Morrissey talks to David Gillen, the Sunday Business editor, about Jules B. Kroll’s entry into the credit-rating business. It was nearly 40 years ago that Mr. Kroll invented the business of corporate intelligence, a sort of private C.I.A. for corporate America. If a big company wanted the dirt on a competitor, they would hire Kroll to dig it up. Now he sees an opportunity in the credit-rating industry. The big credit-rating firms — Moody’s, Fitch and Standard & Poor’s — were criticized in 2008 when they failed to see the crash coming and had triple ratings on companies that eventually collapsed. Mr. Kroll thinks that if he can do better due diligence, he can compete with the Big Three. He sees his strength as uncovering information and knows where to find skeletons and hidden assets. He says that ability is crucial to being able to rate a bond accurately.
The United States economy can’t seem to catch a break. On Friday, the federal government lowered its forecast for fourth-quarter growth to 2.8 percent from 3.2 percent. In the Weekend Business podcast, Catherine Rampell explains why: the turmoil in the Middle East has sent oil prices soaring. Investors fear that the unrest will spread to other countries, further disrupting production. In the United States, major cutbacks by state and local governments and threats of federal cutbacks are throwing more workers into the unemployment pool. Taken together, the uncertainty means businesses are unlikely to invest, let alone hire more workers.
And it gets worse. Not only do rising oil prices mean more expenses for businesses, they affect consumers directly. Experts estimate that every extra penny consumers spend on higher fuel prices takes a billion dollars out of consumers’ pockets in a year. And that means they have less to spend on consumer goods, like televisions or cars, or on dining out and entertainment. The more worried they get, the more they cut back altogether — on everything. Despite the gloom, most economists aren’t ready to predict a double-dip recession. But they do expect growth to be painfully slow.
In an interview on the podcast, Christina Romer, former economic adviser to President Obama and now a professor at the University of California, Berkeley, tells Motoko Rich of The New York Times that the likelihood of inflation is so low the Federal Reserve should be more aggressive in stimulating the economy. In her column in Sunday Business, she offers some suggestions.
Also on the podcast, Janet Morrissey talks to David Gillen, the Sunday Business editor, about Jules B. Kroll’s entry into the credit-rating business. It was nearly 40 years ago that Mr. Kroll invented the business of corporate intelligence, a sort of private C.I.A. for corporate America. If a big company wanted the dirt on a competitor, they would hire Kroll to dig it up. Now he sees an opportunity in the credit-rating industry. The big credit-rating firms — Moody’s, Fitch and Standard & Poor’s — were criticized in 2008 when they failed to see the crash coming and had triple ratings on companies that eventually collapsed. Mr. Kroll thinks that if he can do better due diligence, he can compete with the Big Three. He sees his strength as uncovering information and knows where to find skeletons and hidden assets. He says that ability is crucial to being able to rate a bond accurately.
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