In this reading, the author, Dominick T. Armentano, predicts the impending Great Recession that lasted from 2007 to 2009. Although, Armentano believed the recession would last eighteen months. The author begins this reading by stating the events and policies that lead the United states to be on the verge of a recession. He then then stated what effects the recession make have on the housing markets, auto sales, and stocks. Armentano adds advice in his closing paragraph stating what can be done to “avoid making the slowdown worse.” He mentions that that tax increases and higher minimum wages should be avoided.
1. How, according to the author, has the Fed been responsible for causing the recession that he predicts is about to happen?…show more content… The author states that the bank-fueled expansion was “not sustainable, long term.” When the Federal Reserve tried to correct this by raising rates, the housing expansion stalled and prices for homes fell drastically. The demand for automobiles also dropped significantly with the rise in interest rates.
2. What is an "inverted yield curve," and what does he say it signals?
According to investopidia.com, an inverted yield curve is “an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.” According to Armentano, an inverted yield curve signals economic troubles. The author notes that in an inverted yield curve, when long-term rates are lower, it implies that “long-term business outlook is relatively bleak.”
3. Is this good news or bad news for
