The Federal Reserve plans to reinvest the proceeds of maturing mortgages. This is a reaction to the slow recovery. This move is unlikely to stimulate the economy, and the Fed says the “pace of economic recovery is likely to be more modest in the near term than had been anticipated.” High unemployment, modest income growth, lower household wealth and tight credit are all working against a rapid recovery. Consumers remain reluctant to spend and are instead paying off debt and increasing savings. Some economists believe that this move by the Federal Reserve is mostly for show and will have little, if any, real effect on the economy.
As the economy continues a slow pace of recovery, problems will arise. The government seems to act as though things are improving, but that does not seem to be what actual consumers are feeling. Hopefully, things will improve and/or the government will come up with better ways to stimulate the economy and help bring confidence back to Americans.
Reddy, Sudeep. “Fed Sees Recovery Slowing.” The Wall Street Journal. 11 Aug. 2010.
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