Historically, movements like this have led to a slowdown in economic activity. While the relationship between money supply and economic growth has deteriorated, the basic qualitative relationship seems to have held up pretty well, so this is of some concern.
More Quotes from Paul Kasriel:
In 1987 we had a sharp increase in long-term interest rates and a stock market crash when there was a run on the dollar. While a lot of people think a weaker dollar is a good thing, it essentially makes us poorer and turns out not to be a good thing.Paul Kasriel
Nobody wants a strong currency, and since the U.S. currency is fundamentally weak, foreign central banks need to buy up dollars to keep their currency from appreciating.
Paul Kasriel
If the Fed pauses here, rates will come down, the house ATM machine will get filled up again, and we can all go back and do more refinancing. But if they keep going, like some people believe they will, then we will have a recession in the second half of 2005.
Paul Kasriel
Now, of course, a lot of it ... was in auto sales and production is probably going to flatten out in the months ahead.
Paul Kasriel
Fed policy-makers think their job now is to play a supporting role. They kind of want to drift into the background.
Paul Kasriel
When you print money, it's going to inflate some asset price. Maybe we'll revert to the late 1990s and buy stocks with it.
Paul Kasriel
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