Fiscal Policy Madness

Tim Duy follows the actions of the Federal Reserve very closely.  In this post he raises concerns about statements from Richard Fisher, who is the President of the Federal Reserve Bank of Dallas, and from Alan Greenspan, the discredited former chairman of the Federal Reserve.  He is concerned because the US recovery has been much stronger than it has been in European countries that have responded to the crisis by invoking contractionary fiscal policy.  Fisher and Greenspan would like the US to do what Europe has been doing.  That is exactly what investors are worried about.  The stock market is reacting to negotiations about fiscal cliff that the US faces in December.  Investors are concerned that it will lead to large cuts in short term federal spending that will derail the struggling economy.