That, I think, is the message from today’s big jump in consumer confidence. The Conference Board’s index vaulted by 14.1 points in May, following a gain of 13.9 points in April. The overall index now stands at 54.9. That’s double the February level of 25.3, a level which looks more and more like the nadir. But there is one whole long stretch of road between economic Armageddon and a robust recovery. We have avoided the former but we are nowhere near the latter. Let me know when consumers start spending ….
Federal Reserve Vice Chairman Donald Kohn makes two big points in a speech today at Princeton: 1) Obama’s big spending won’t push up rates anytime soon; and 2) there will be no rush for the Fed to get constrictive:
While I know it’s fashionable to laugh off the big budget deficits that the U.S. is running and to pooh-pooh the chances of an S&P debt downgrade, guess who doesn’t think it’s a big joke? The Congressional Budget Office. This, from the blog of CBO Director Doug Elmendorf:
Relying on the Fed cannot be the sum total of an economic policy to increase economic growth. In fact, current Fed policy may well be saving the U.S. banking system, but it is hardly setting the stage for a robust economic recovery. Scott Grannis (Calafia Beach Pundit) notices the rise in 10-year yields (bold is mine):