I still believe in the “business cycle,” that the economy will cycle through expansion and contraction phases over time.

If you believe the business cycle is extinct, that the Federal Reserve has purportedly come up with a stratagem to ensure that a recession never happens again, this letter to the editor is irrelevant.

However, if you still believe in the business cycle, I would like to pose a question.

To fight off the last recession, the Fed was able to decrease interest rates from 5.25 percent to zero percent and increase its balance sheet from $800 billion to $4.5 trillion. The federal government increased its annual spending by 57 percent and increased its debt by 120 percent just since 2008.

Even so, we still had the Great Recession and the worst economic recovery since the Great Depression.

When the next recession does hit, the Fed would only be able to cut the Fed funds rate by 238 basis points compared to 525 basis points last time. They could do more quantitative easing, which is creating money on a computer screen and buying mostly government debt, but we have already observed that only produces asset price inflation and misallocation of capital.

And with the National debt already $22 trillion, more than twice what it was in 2008, and with government spending already $4.4 trillion per year, borrowing more money may only continue to subsidize the superrich via asset price inflation while looting the middle class due to lousy wage growth.

What’s the Fed going to do that they haven’t already tried and miserably failed at?

In January 2008, Ben Bernanke, the Fed chairman at the time, said he didn’t see a recession. As it turned out, we were already in recession.

What’s Bernanke’s thoughts now? Bloomberg reported, June 7, 2018, “Bernanke says U.S. economy   faces a ‘Wile E. Coyote moment in 2020.’ ” CNBC reported on July 18, 2018, “Bernanke warns America may not have the tools to counter the next financial crisis.”

I disagreed with everything Bernanke did in 2008, and I’ve been outspoken about it, but now I completely agree with him.

The New York Times reported, October 23, 2018, “Paul Volcker, at 91, sees ‘a hell of a mess in every direction.’”

Fortune magazine reported, December 18, 2018, “Alan Greenspan warns investors: Bad economic times are looming.”

You are more likely to get an honest assessment on the economy from the ex-Fed chairs than the current one Jerome Powell.

Richard Strozinsky

Walla Walla

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