Volcker Says the U.S. Economy Is ‘Leveling Off’

The economy is "leveling off at a low level". So does an airplane just before it crashes into the ground and kills all onboard. I like Paul Volker, he is a straight-shooter and probably the smartest (and least listened to) member of the Obama's financial team. I agree with Volker, the economy will not show any real and sustainable growth for at least two years.-Lou

Volcker Says the U.S. Economy Is ‘Leveling Off’

April 29 (Bloomberg) -- The U.S. economy is “leveling off at a low level” and doesn’t need a second

Volcker, head of Obama’s Economic Recovery Advisory Board, said the 6.1 percent decline in first-quarter gross domestic product reported by the government today was “expected.” More recent data show the contraction in housing, business spending and inventories has slowed, and stimulus spending is only just beginning to hit the economy, he said.

Still, with the financial system functioning only by “the grace of government intervention,” the economy is “in for a long slog” before a recovery takes hold, Volcker said on Bloomberg Television’s “Conversations with Judy Woodruff” airing May 1 at 6 p.m. Government help will continue, and the administration won’t let any banks fail, he said.

“I’m not here to tell you the economy is going to recover very strongly in the short run,” Volcker said. “There is reason to believe that it should be leveling off, at a low level.”

While Volcker suggested the economy may not need a second stimulus, he said growth isn’t likely to pick up markedly for several years.

‘Take a While’

“I do not think there are grounds for great optimism,” Volcker said. “It is going to take a while, I think, to have a strong recovery.”
That will keep the government involved in the financial system, and the administration will provide the capital needed to keep banks afloat, he said.

“There’s a visible commitment by the government to support these so-called systemically important institutions at this point,” said Volcker, 81, who was Fed chairman from 1979 to 1987. “So they’re not going to go under in the sense of ceasing operations or even interrupting operations. It’s a question of how much support they’re going to need.”

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