Economy faces that '70s feeling again; Fed has a big challenge

[babylonsister]

Economy faces that '70s feeling again; Fed has a big challenge

By Kevin G. Hall | McClatchy Newspapers


WASHINGTON -- Not since the 1970s has the U.S. economy faced such an ugly combination of a persistent energy shock, a looming recession threat and menacing inflation that stays stubbornly high -- even in the face of a screeching slowdown in growth.

This combination has the Federal Reserve, charged by law with both sustaining growth and curbing inflation, in a bind. It must balance the needs of protecting the economy from a downturn while protecting it against an upward spiral of prices — and doing either one can make the other far more difficult.

In addition, this dilemma comes amid the worst housing slump in modern times, as well as an unprecedented crisis in credit markets whose positive outcome is far from certain. Adding to the troubles are the dive of the U.S. dollar against other currencies and rising global inflation that partly mutes whatever action the Fed takes.

"This thing has the potential to really unwind to create huge negative effects," said Lyle Gramley, a former Fed governor from 1980 to 1985, one of the U.S. economy's most turbulent periods. "The Fed is walking a tightrope right now, that's for sure."

more...

http://www.mcclatchydc.com/251/story/41159.html

[cloudythescribbler]

1. If we're LUCKY, we'll get away w/an economy as GOOD as the 70s!!!! eom