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Is U.S. Still at Risk for a Double-Dip Recession?

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    Harvard Economist Jeffrey Miron on the outlook for the U.S. economy.

  • Duration 6:03
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Companies making record profits but unemployment is stagnant.

Why is there such a disconnect between corporate balance sheets and American paychecks joining me now Jeffrey Miron an economist at Harvard University.

Jeff welcome back of the show it's always great to have you here.

I -- start though with the Federal Reserve which obviously in the news today they finish their two day meeting.

They see that they say they're gonna keep interest rates at zero for another two years.

Every bit -- for three and a half years what does that tell you about what the Fed thinks of the economy.

-- tells us that the Fed still thinks the economy is weak and it tells us that the Fed still thinks he can get the economy to grow faster by keeping interest rates really -- And it's -- hard to make a case at this point that they should raise rates in any significant way because there's still is fair bit of slack in the economy.

-- risk is that at some point.

Economy recovers fast enough for creates pressure for inflation and the Fed can't easily.

You know reversed course and control inflation when that happens.

-- also today it became clear that the UK going into recession they've had two consecutive quarters.

Of negative GDP growth it -- obvious sign they're struggling.

Could happen here we've seen economists all over the country ratcheting back their expectations for our economy.

Could we -- -- appeared.

There's -- risk certainly the US economy is not growing in the robust way that we like to see after a recession especially after a deep recession.

Everything so far as sort of indicating continued weak recovery.

But if something went significantly wrong with oil prices with the financial crisis in the Euro zone.

Then yes there's that certainly is some risk of a double dip here I don't think very many people expected five I don't think too many people are positive won't happen either.

Hit the -- seems like companies American companies are doing really well we see record profits -- talked about apple lot of companies pay things seem to be look at up.

But it's not translating here in the US and I think that's what's so frustrating for Americans yes apple -- have record profits at the end of today where you do it for me and the answer is not much.

What's the solution to that.

Well I'm not sure there is a magic solution -- one part of what's going on is that a lot of US companies are selling all over the world.

So -- market the demand for their products is not governs solely by US consumers and how much disposable income they have.

It's governed by the whole world economy which in some places is doing well in some places is not doing so well.

But it's also the case that we had a huge structural imbalance with so many.

People in construction who are unemployed.

And are not getting back to work in construction for the simple reason we've built too many houses you don't need to go lots more houses is gonna take awhile for that for that to change.

Well seems to -- like.

All of the government solutions to getting this economy back on track have have been -- they have worked very well and we had a big report today.

On -- how well the TARP work.

It promises were all off base we were told we make money on -- -- didn't happen of fact.

The government her I'm sorry the folks who -- this report today and -- chart they -- the government will lose sixty billion dollars.

We're still flowed out of TARP.

Almost a 119 billion what do you say to that.

Well so first of all I mean.

Relative to what people are worried about when TARP was first proposed losing a 11940.

Billion doesn't sound so bad compared to.

You know losing 600 billion which is what sort of people -- -- certainly concerned about that it was all just going to be a gift and was never gonna come back but I think the crucial thing as TARP.

Is only a very small part of the whole story in addition of the fact that treasury gave this tart money out and got a six a substantial fraction back.

Federal Reserve has bought a ton of assets.

From the banking sector they bought the crummy assets these -- back assets.

Which have probably depreciated a huge amount in value as time has gone on for the Fed has made some interest on that Indians -- -- when it goes to undo that when it goes to excel that's stop off.

It's probably gonna take some serious capital losses which then make the whole.

Federal government intervention look a lot less profitable than just focusing on -- Well it's not profitable at some point and you say it's even worse than we think.

-- -- that said that's pretty telling however.

You have a solution to some of these problems you say that if we legalize marijuana the world will be a better -- why.

Well I certainly think there will be a better place we legalize marijuana I don't think it's more than a teeny almost infinitesimal.

Solution to our budget problems.

How did out of place because people who want to consume marijuana and who are turning anybody else will be able to do so without being hassled by the government -- say whether people want to consume alcohol or cigarettes or go downhill skiing or whatever.

All sorts of risky things we let people do legally.

They can do them and if they make mistakes they should pay don't they -- consequences but if they're not harming anybody else is their business not the government's business.

Check you know I just disagree with you -- -- I.

I got to tell you that you know there's lots of things you could make Gillick you know you think well you know.

Let's see murders what it looks like that legal that's a private thing -- a long time ago was a private thing.

It would save a lot of money on top sin.

And and please send and we can really you know -- keep some money in our pockets if we don't go after some of the petty crime maybe they would get rid of those rules to.

-- -- Isn't -- slippery slope argument here.

Known now there's a crucial difference between -- a law against using marijuana law against murder or robbery or rape or something.

Those latter things they directly and substantially harm somebody else if I'm sitting in my living room smoking -- -- why is that any different than sitting my living room drinking a glass of wine why isn't anybody else's business I think -- -- So we are not things social cost don't agree with it single Gateway's strategy up at the Gateway -- -- not -- -- -- current -- -- -- online right.

I have I haven't convinced everybody at a hobby has clearly not including -- up.

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