Why american growth has continuously stalled.

  The central government bank, in this case, the Federal Reserve controls the nation's money supply. It also sets interest rates and the cost of lending. We have seen this from Quantitative easing policies set in the last few years. And the changing of interest rates for as long as people can remember. Today, oil prices stand at around 90 dollars per barrel. In case people have forgotten, oil prices used to be 140 dollars per barrel pre-recession. The Federal Reserve has about three main pillars that it needs to give much consideration to. Controlling inflation, encouraging economic growth, and maintaining low levels of unemployment. Unfortunately, these three objectives do not always share a commonality. In fact, they even serve as an antithesis to one another.

  In 2006, record equity values, home prices, and commodity speculation led to some serious questions about inflation. Challenging the very foundation of the Federal Reserve. If one of the Federal Reserve's main goal is to control inflation. Then clearly, the Federal Reserve is doing a terrible job, evidenced by high housing prices, high oil prices, and high levels of speculation. The Federal Reserve needed to undo what it had created. Instead of setting interest rates low to battle the recession Bush inherited from president Clinton. Interest rates needed to be hiked again to battle the high levels of inflation that was generated from strong economic growth.

 The Federal Reserve practiced a very slow and meticulous policy. It didnt want to pop the economic bubble. The goal was to simply deflate some of the air out. Nonetheless, an explosion erupted. With housing prices and equity markets falling in value, home owners and investors suffered a considerable loss to their savings which was tied to their assets. Without higher property prices to act as a motivator to produce more homes, construction companies too began to file for bankruptcy.

  While the consequences were huge, the Federal Reserve did accomplish what it set out to do. It finally placed a lid on inflation. In 2008, record losses in consumer spending, and personal incomes led to some of the best deflation in years. With double digit unemployment rates and people suffering from little to no income, consumer prices and energy prices had no choice but to fall as a result of depleted demand. And thus, the single greatest contributor to controling the consumer price index was unemployment and wage deflation.